Phillip Swagel

Phillip Swagel on CNBC commenting on the July 2017 jobs report. Watch.


Statement: Increasing U.S. Competitiveness and Preventing American Jobs from Moving Overseas

House Ways & Means Hearing May 23, 2017
By Phillip Swagel

The key to evaluating the border adjustment is to keep in mind the big picture benefits of the overall Brady-Ryan tax reform: lower tax rates mean a stronger US economy with more jobs, higher incomes, more spending by families, and more investment by businesses. The Brady-Ryan plan also addresses the tax bias in favor of debt over equity financing, leading to not just a stronger economy but a more stable one as well. With the Brady-Ryan plan, the United States will have a much more competitive tax system, and become a more attractive destination for global investment and economic activity.

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Privatize Fannie and Freddie, yes. But be pragmatic.
By Susan Gates, Ann Schnare, and Phillip Swagel

It is a hopeful sign that Treasury Secretary Steven Mnuchin has raised privatization of Fannie Mae and Freddie Mac as an early order of business for the new administration. The red ink that poured out of the two companies during the financial crisis has long stopped flowing, but Fannie and Freddie remain in the government-controlled limbo of conservatorship they entered in September 2008. This leaves a situation in which government domination of the housing finance system puts taxpayers on the hook in the event of serious problems, even while many families find it difficult to obtain a mortgage. With the two government-sponsored enterprises (GSEs) still the linchpins of the mortgage system, taxpayer money surely would be used to prop them up again in the event of a future housing downturn. Hence, it is understandable that Mr. Mnuchin would like to privatize the entities as soon as possible, both to reduce taxpayer risk and to improve the effectiveness of the mortgage system at ensuring access to financing for families looking to buy homes.

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Legal, Political and Institutional Constraints on the Financial Crisis Policy Response
By Phillip Swagel

The story of the financial crisis response can be told through the lens of evolving legal and political constraints. In late 2007 and early 2008, while policymakers recognized weaknesses in the system, they believed that conventional monetary and fiscal responses such as Fed lending and a modest fiscal stimulus would suffice to buoy the US economy while the imbalances that had built up during the housing bubble were resolved. By the time of the Bear Stearns bailout in March 2008, the usual methods were clearly perceived to be inadequate, and the Fed was making discretionary choices to invoke authority reserved for “unusual and exigent” circumstances to respond to the potential collapse of a nonbank financial firm. In September 2008, the Fed’s ability to use this discretionary authority had reached its limits, and the imminent risk of financial crisis led to the Troubled Asset Relief Program. The advent of the TARP capital injections facilitated a program of guarantees by the Federal Deposit Insurance Corporation to support bank funding, undertaken with existing legal authority but in an extraordinary way. Together, these actions reassured market participants that the US financial sector would not collapse and marked the beginning of the stabilization from the crisis.

Professor Swagel notes that there will inevitably be another financial crisis, and the response will be shaped by both the lessons learned from recent history and the statutory and political changes in the wake of the crisis. The paper thus concludes by discussing changes in constraints since the crisis, with a focus on two developments: 1) the political reality that there will not in the near future be another wide-ranging grant of fiscal authority as was given with the Troubled Asset Relief Program, and 2) the new legal authorities provided in the Wall Street Reform and Consumer Protection Act of 2010, commonly known as the Dodd–Frank law.

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