Epstein UMass Economics

Epstein argues that the Volcker policy on big banks is unlikely to be implemented

Prof. Gerald Epstein, Umass Amherst EconomicsGerald Epstein, UMass economics professor and co-director of the Political Economy Research Institute (PERI), is a member of the group SAFER, an organization that supports the Volcker policy. This policy was brought forth by the Obama administration for the purpose of reducing financial recklessness among big banks. With this new policy, large banks would be prevented from conducting their own proprietary trading and owning hedge funds. However,  Epstein remains skeptical that the policy will not have a tangible impact on the way large banks operate.  He claims that it would require political magic or “a big push from the Obama administration” to actually implement.

Maybe Jamie Dimon and his colleagues at JPMorgan Chase (JPM: 40.87, 0.85, 2.12%) didn’t get the memo: the Obama administration wants to prevent another financial crisis by reining in Wall Street risk and putting an end to banks that are “too big to fail.”

The administration hopes to achieve this through the so-called Volcker rule, which seeks to limit risk by barring banks that accept government-backed deposits from conducting their own proprietary trading and from owning hedge funds.

Named for former Federal Reserve chairman and current top Obama economic advisor Paul Volcker, the proposal was unveiled last month, and the White House is pushing for its inclusion in the broad financial reform legislation slowly winding its way through Congress.

Almost immediately, key members of Congress expressed skepticism for the rule, notably Senator Chris Dodd, D-Conn., chairman of the banking committee that is overseeing financial reform.

European leaders earlier this week publicly denounced the proposal, saying it ran counter to Europe’s fiscal interests and that it doesn’t reduce risk, just moves it somewhere else.

Then on Tuesday JPMorgan, the second biggest U.S. bank, got a little bigger by slapping down $1.7 billion for – naturally – a proprietary commodities trading business owned jointly by Sempra Energy and Royal Bank of Scotland (RBS: 11.13, 0.41, 3.82%).

Speculation quickly arose as to whether Dimon, JPMorgan’s CEO, was sending a not-very-subtle message to the president.

“Is it possible that JPMorgan Chase does not see these proposed rules and laws going into effect for any sustained period or perhaps not at all,” asked influential banking analyst Richard Bove of Rochdale Securities.

Bove went on to praise Dimon for a “courage sorely lacking elsewhere among other leaders of American banks.”

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Folbre UMass Economics

Folbre explores “Gender Trade-Offs” in Economix Blog

Prof. Nancy Folbre, Umass Amherst EconomicsNancy Folbre, UMass  economics professor and contributor the NY Times Blog, Economix, examines gender inequality and trade-offs in a recent post.  Although women’s income, relative to men’s, has improved over the last forty years, increasing from 62 cents to the dollar in 1970 to 80 cents in 2008, Folbre argues that it has not come without trade-offs.  For instance, women are less likely to get full-time job because they are typically the family caretakers.  And although unmarried women, who don’t have as many responsibilities, earn almost equal pay as men, Folbre points out that “going without a family seems a rather steep price to pay for equality.”

February 22, 2010
Gender Trade-Offs

It’s pretty hard to get something for nothing. That’s one reason why economists like to analyze trade-offs.

Changing gender roles in our society have created some rather complicated trade-offs, and that helps explain why it’s hard to assess progress toward gender equality.

Women on nonfarm payrolls — a measure that includes part-time workers — now slightly outnumber men.  Employers find women attractive to hire in part because women typically earn less than men with the same education.

A recent comparative analysisof 21 countries by two sociologists at the University of Washington, Becky Pettit and Jennifer Hook, reports that women’s labor-force participation tends to be lower in countries where their earnings relative to men are higher.

For instance, in Germany and Italy, a smaller percentage of women work for pay than in the United States, but those who are employed earn more, on average, relative to men.  Women who overcome the obstacles to employment there tend to be high earners.

Across all countries, overall inequalities in wage income influence average differences in men’s and women’s earnings. So do public policies such as child care provisions that help adults cope with trade-offs between paid and unpaid work — and, more broadly, between economic independence and family commitment.

These trade-offs remain sharply significant in the United States.