Ezra Klein

DEAN BAKER IS NOT IMPRESSED WITH THE STRESS TESTS.

Here's why:

Unemployment -- in their negative scenario, the stress tests assumed a year-round average unemployment rate of 8.9 percent for the 2009 and 10.3 percent for 2010. The economy is on track to have a much higher unemployment rate, as it is likely to hit 9.0 percent in April. My best guess for a year-round average would be 9.4 percent for 2009 and probably around 10.5 percent for 2010. (These numbers assume no second stimulus, but of course Congress will not sit back and just let the unemployment rate go through the roof.)

TESTING THE STRESS TESTS.

For more stress test commentary, check out this roundtable the New York Times held with an array of financial system experts, including Yves Smith, Simon Johnson, and William Black. The assessments range from furiously negative to grimly unconvinced. It's, err, stressful* reading.

*Sorry, sorry...

DAY OF STRESS.

The results of the Supervisory Capital Assessment Program -- sorry, the stress tests -- are out. You can download the full release here.

THE WASHINGTON HOUSE FOR UNEMPLOYED TRADERS LOOKING TO SAVE THEIR SOULS.

I had an interesting e-mail exchange yesterday with a finance expert thinking of moving to DC. Come, I said. There's work for you. And there is! Too much, in fact. One of the problems bedeviling Washington's response to the financial crisis is that there's very little financial expertise outside Wall Street. There's some in the regulatory sector. But just about none in the ideas industry. And there's a reason for that. I'm not going to say finance is boring, but the sort of people who are interested in it tend to be the people who are interested in making money in finance, not in moving to DC and taking an entry level job at Brookings for $32,000 a year. And it's not as if Wall Street has been picky about hiring in recent years.

THE SEC (YEAH YOU KNOW ME!).

It's sort of received wisdom that the Securities and Exchange Commission is irredeemably captured by the financial industry and totally incapable of conducting its daily affairs. But what you didn't know was how comically incompetent it was. Moe Tkacik -- with an assist from a GAO report -- explains.

IN DEFENSE OF MALCOLM GLADWELL.

Sorry for the slow blogging today. Meetings are the enemy of the blog. But I did want to say a word on Malcolm Gladwell, who's coming in for a lot of semi-deserved flack for his article on underdogs. In the piece, Gladwell offers up a puff job on Silicon Valley parent who coached a team of 12-year-olds to championship by spurring them to employ full court press. Gladwell uses this to make his point about the tactics of the underdog: The weaker power can only win if it aggressively defines the rules of the conflict in a way that disadvantages the stronger power. This isn't exactly a new insight: It's called asymmetric warfare.

BAILOUT MATH.

Felix Salmon writes:

When the government announced its stress tests on February 23, Bank of America stock closed at $3.91 a share. At that level, if the government converted $34 billion of preferred stock into common equity, it would have received 8.7 billion shares in Bank of America. There are 6.4 billion shares outstanding right now, which means the government would have ended up with a controlling 58% stake in the company.

BIG CUTS, SMALL PLATES.

Peter Orszag lists off a couple of the programs the administration is eliminating. Included among them is this winner of an expenditure:

Educational attaché, Paris, France ($632,000). The Department of Education can use e-mail, video conferencing, and modest travel to replace a full-time representative to UNESCO in Paris, France.

CAN LOCAL BLOGGERS REPLACE LOCAL NEWS COVERAGE?

todays_local_news.jpg"Not only is it going to be intrinsically difficult to ever find a viable revenue model for paying a reporter to cover the zoning board if people don’t want to read about the zoning board," writes Matt Yglesias, "[but] I’m not actually sure how much social value is created by unread articles about zoning boards.

BAUCUS ON CAP AND TRADE: "COSTS OF INACTION WOULD BE FAR GREATER."

The Senate Finance Committee is holding hearings on cap and trade today. And Baucus starts it off with a nice point. "Action would not be without cost," he admits. "But the costs of inaction would be far greater."

HAPPY BUDGET DAY!

That's how Obama's aides are signing their e-mails today. And why not? It's a big day! The full budget! "Financial information on individual programs and appropriation accounts"! "The proposed text of appropriations language"! Extremely trivial cuts that the administration is nevertheless selling as a painful effort in belt-tightening. Join the fun!

THEORY VS. PRACTICE.

When you're arguing policy, you have to decide whether you're arguing in the perfect world or the real world, and then you have to hold that constant. There's no use arguing a textbook policy against a piece of legislation, or vice-versa.

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