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David Dayen

David Dayen is a contributing writer to Salon.com and a weekly columnist for The Fiscal Times. His forthcoming book about foreclosures will be published by the The New Press.

Recent Articles

Financial Reform's Triple "F" Rating

In current practice, banks pay agencies to assess their financial products favorably. Why hasn't this system of kickbacks been eliminated?

Flickr/The Truth About
E arlier this month, the Justice Department and 16 state attorneys general sued the Standard and Poor’s (S&P) credit-rating agency, accusing the company of improperly inflating the ratings of 40 collateralized debt obligations (CDOs)—essentially, securities made up of other mortgage-backed securities—at the height of the housing bubble. According to the suit, S&P misled investors by rating the risky securities as "triple-A," super-safe investments. But the purchases turned into massive investor losses when the bonds failed after the bubble collapsed. Using emails and other communications, state, and federal prosecutors will seek to prove that S&P knew the securities were junk but rated them highly for the most obvious of reasons: to make more money. The lawsuit gets at a major problem at the heart of the credit-rating business: Rather than investors paying rating agencies to assess the value of securities it is the issuers of the securities themselves who pick up the tab...

Wonder Warren

AP Photo/Win McNamee
AP Photo/Win McNamee Senator Elizabeth Warren, Democrat from Massachusetts, at the presidential inauguration S ince the start of the new Congress, liberal Democrats have anxiously awaited senior Senator from Massachusetts Elizabeth Warren’s initial moves. Celebrity entrants into the Senate—from Hillary Clinton to Al Franken—have tended to take a modest approach, immersing themselves in committee work and issues of local importance, building relationships with their colleagues, and operating as a “workhorse, not a show horse.” By contrast, Warren said during the campaign that she wanted to use her new position as a platform for her ideas . And one of her first actions suggests she will spend her time as Senator much the way she did as chair of the TARP oversight panel and at the Consumer Financial Protection Bureau: shedding light on the harm caused by unscrupulous financial interests. (Editor's note: Warren's daughter, Amelia Warren Tyagi, is a member of the Prospect 's governing...

Turning Points

Five chances to avoid the debt-ceiling fight that Obama missed

(Rex Features via AP Images)
The debt-ceiling fight did not have to go down like this. Along the way, any number of political actors, from the president to congressional Democrats, had the ability to defuse the bomb with which Republicans held the nation's creditworthiness hostage. Here are five missed chances to change the dynamic. OBAMA AND DEMOCRATS COULD HAVE FIXED THE ECONOMY . While this sounds pie-in-the-sky, there's actually a pretty simple solution to our economic woes. It involves higher near-term deficits, particularly spending to create jobs. The Obama administration admitted that it underestimated the extent of the recession, and last Friday's report on gross domestic product from 2007 to present underlines the severity of the downturn. The stimulus package worked but was too small to counter the devastation caused by the financial crisis. If a Democratic Congress had approved a second stimulus plan -- a $154 billion jobs bill passed the House in late 2009, when the Senate had 60 Democratic votes --...

Gang of Meddlers

The Senate bipartisan commission's plan for reducing the deficit throws a spanner in the works.

(AP Photo/Alex Brandon) Sen. Mark Warner, D-Va., and Sen. Saxby Chambliss, R-Ga., leaders of "The Gang of Six"
The debate over raising the nation's debt ceiling has strayed into dangerous territory. After talks broke down last Friday between President Barack Obama and House Speaker John Boehner on a "grand bargain" to cut budget deficits by $4 trillion over the next decade, both Republicans and Democrats rushed to blame the opposing side. But as the House Speaker and Senate Majority Leader Harry Reid prepare to release their own proposals -- which, if the leaked details are any indication, are intended to win the political fight without getting past the policy impasse -- another set of politicians is more culpable than anyone: the Gang of Six, the bipartisan group of senators who announced a deficit deal to great fanfare last week. Before the Gang of Six re-emerged as a force in the debate after the group fell apart earlier this year, Obama and Boehner were working on their long-term deal and, as of last week, were coming close to hammering one out. Meanwhile, Senate Majority Leader Harry Reid...

And for His Next Trick

Mitch McConnell offers a debt-ceiling plan that is all smoke and mirrors.

(AP Photo/Susan Walsh)
Senate Minority Leader Mitch McConnell has concocted an elaborate scheme that would allow President Barack Obama a clean shot at raising the debt limit, in three installments, over the next year and a half. Unlike his fellow Republicans, McConnell will not use the debt-ceiling fight to force cuts in discretionary spending or safety-net programs. Instead, he focuses on his chief preoccupation: winning elections for the GOP. McConnell's proposal would create a byzantine system for raising the debt ceiling: The House and Senate would first pass a bill that authorizes the president to submit a request to increase the debt limit, first by $700 billion, then in additional installments of $900 billion a piece. In each case, the president would have to concurrently submit a separate plan to reduce spending by an equal or greater amount. That's the last we see of those spending plans; they are purely hypothetical, and they play no role in the rest of the legislative machinations. Congress...

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