Baum on Money: Fed Discount Daddy

Happy Friday, all. Here's what I'm reading to start my day. Have a great weekend.

Happy Friday, all. Here's what I'm reading to start my day. Have a great weekend.

The father of the Fed's discount window

Carter Glass and Robert Owen may be the two lawmakers most closely associated with the Federal Reserve Act of 1913. But it was banker Paul Warburg who deserved credit for the idea of backstop lending, and was the model for Ben Bernanke's response to the financial crisis, according to Bloomberg News's Craig Torres. Economist Michael Bordo calls Warburg "the father of the discount window," which Bernanke used "to provide banks with $111 billion in loans" as short-term credit markets froze following the bankruptcy of Lehman Brothers on Sept. 15, 2008. Warburg's contribution to the Fed's stabilization policies may be new to the reader, but it was clearly understood by Bernanke.

Another day, another exemption from Obamacare

If you lost your health care plan, you can't keep it. But you may be exempt from the individual mandate. The Washington Post's Ezra Klein explains the latest modification to the health care law: the determination that having an insurance plan cancelled qualifies as "an unexpected natural or human-caused event." Those folks can ignore the mandate or purchase one of those sub-standard plans that worked for the holder but didn't comply with the law. "This puts the first crack in the individual mandate," Klein writes. "The question is whether it's the last." Any more tweaks, and President Obama may wish he had taken the Republicans advice and delayed the implementation of the entire law for a year.

How real incomes stack up (or down)

It's no secret that the 2008 financial crisis and recession took a toll on real per-capita income. Just how big? Using data from the OECD, the Wall Street Journal's Real Time Economics looks at the change on a purchasing power basis from 2008 to 2011 in 47 countries. The U.K. was one of the biggest losers. The only winner among the G-7 countries was Germany. Greece saw the biggest decline. Mexico and Chile saw real income increase. Research by Carmen Reinhart found that it takes an average of eight years for real per-capita income to return to pre-crisis levels. Just one more reason why prevention is the best cure.

Who benefits from tax expenditures?

Want to know why all the talk in Washington about closing tax loopholes is just talk? Because we all benefit from tax expenditures, according to the Tax Policy Center's Howard Gleckman. "There is a tax expenditure under the holiday tree for just about everyone," he writes. Many of these exemptions and deductions -- for charitable giving, for state and local taxes -- benefit the rich and super rich: those who can put their money where their self-interest is. The mortgage interest deduction seems almost holy (untouchable, in other words). The big-name CEOs who signed on to the Campaign to Fix the Debt, many of them champions at avoiding taxes, are among the main reasons the tax code remains ridden with holes.

Freedom's just another word for the state in which you live

The Mercatus Center has a nice infographic ranking the states on a combination of economic and personal freedom in 2013. Guess which state is first? Think oil. Guess which is fourth? Think state mottos: Live free or die. Guess which is 50th? Sorry, Governor Cuomo. Close behind are California and New Jersey. Governor Chris Christie better do something if he's going to appeal to libertarians in 2016.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

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    Caroline Baum

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