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Archives for: September 2008


Pioneer Press (Minnesota), 9/4/2008
Natural gas no real alternative to gasoline, says Lave
Using natural gas in vehicles would push up its price to a point where it would no longer serve as a low-cost alternative to gasoline, says Lester Lave, Harry B. and James H. Higgins Professor of Economics and University Professor; Director, Carnegie Mellon Green Design Initiative; Co-Director, Carnegie Mellon Electricity Industry Center. Responding to a plan by Texas oil billionaire T. Boone Pickens, which also calls for building a superhighway-style electrical grid to deliver wind energy to the coasts, Lave notes that most people hate transmission lines.

Financial Times, 9/5/2008
Lave: More drilling OK if conservation efforts step up
If the United States was willing to work on energy conservation, Lester Lave says he would favor opening new areas to oil drilling. But simply drilling more will not solve problems long-term, according to Lave, Harry B. and James H. Higgins Professor of Economics and University Professor; Director, Carnegie Mellon Green Design Initiative; Co-Director, Carnegie Mellon Electricity Industry Center.

Colorado Independent, 9/11/2008
Meltzer: Politicians might address credit crunch with pressure
It’s disappointing, but not surprising, that neither presidential candidate is tackling the credit crunch in detail, says Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. Meltzer says politicians don’t like to talk about contentious issues that upset people, but says that could change if the public forces the discussion by questioning candidates during debates and public appearances.

Boston Globe, 9/11/2008
Oil prices low for now, but likely to spike again, says Lave
Despite a recent drop in oil prices, in the long run, prices will rise again, predicts Lester Lave, Harry B. and James H. Higgins Professor of Economics and University Professor; Director, Carnegie Mellon Green Design Initiative; Co-Director, Carnegie Mellon Electricity Industry Center. Global supplies remain tight and any serious disruption, such as hurricanes in the Gulf of Mexico or violence in the Middle East, could drive them up again, analysts say.

Pittsburgh Business Times, 9/12/2008
Tepper School startup looking for space
Tepper School alums Susan Gregg Koger and Eric Koger are looking for an office size that will suit their company’s pace of growth. The couple started ModCloth Inc., which sells vintage clothes and accessories, out of Susan’s CMU dorm room in 2002.

Bloomberg, 9/13/2008
Meltzer: ‘It’s about time’ for government to take hands-off approach to stumbling firms
Count Allan Meltzer among those who are applauding Treasury Secretary Henry Paulson’s opposition to using government funds to aid Lehman Brothers. Meltzer, The Allan H. Meltzer University Professor of Political Economy, says the system can’t work if the bankers make money while the taxpayers take the losses.

Los Angeles Times, 9/14/2008
Meltzer: Disaster predictions are a natural reaction for Lehman Bros. investors
In the case of troubled investment banking giant Lehman Brothers, investors who own the firm’s stocks or bonds naturally believe the company is too important to fail, says Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. Meltzer says those who anticipate losses predict disaster because they want help.

Pittsburgh Tribune-Review, 9/16/2008
Long-term prognosis of decisions in Lehman Bros. case is good, says Meltzer
The bankruptcy of Lehman Brothers and merger of Merrill Lynch and Bank of America will cause excitement and panic in the short term, allows Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. However, the long-term consequences should be “very good,” and the Fed should have made a similar hands-off decision when Bear Stearns failed, Meltzer says.

Money Blogs (Australia), 9/16/2008
Falling markets produce ‘ostrich effect’ among investors, research shows
Behavioral economists George Loewenstein and Duane Seppi, Professor of Financial Economics, use the term “ostrich effect” to describe how some investors essentially stick their heads in the sand whenever markets turn sharply downwards. Their research showed that Scandinavian investors checked the value of their investments 50 to 80 percent less often when share prices were falling.

San Francisco Chronicle, 9/16/2008
Idle refineries drove oil prices down, says Lave
Oil prices are down because gasoline refineries along the Gulf Coast shut down due to Hurricane Ike, according to Lester Lave, Harry B. and James H. Higgins Professor of Economics and University Professor; Director, Carnegie Mellon Green Design Initiative; Co-Director, Carnegie Mellon Electricity Industry Center. The 14 refineries that closed together make about 22 percent of all the gas produced in the United States.

Townhall.com, 9/16/2008
Lerrick discusses impact of Lehman Brothers failure
Adam Lerrick, The Friends of Allan H. Meltzer Professorship, appeared on host Dennis Prager’s show on the Salem Radio Network. Lerrick discussed the failure of Lehman Brothers and what it means for the economy.

Securities Law Daily News, 9/16/2008
Short selling has an important role in capital markets, Spatt says
Short selling plays an important role in capital markets, according to a policy group statement presented by Chester Spatt, Mellon Bank Professor of Finance; Director, Center for Financial Markets. Short selling allows investors to express legitimate concerns about the overvaluation of firms, which falls in line with the Securities and Exchange Commission’s own investor protection mission, Spatt notes.

Erie Times-News, 9/17/2008
Hurricane Ike’s effects will be felt everywhere, Lave says
While areas that depend most directly on the Gulf Coast will be hit hardest by the aftereffects of Hurricane Ike, everyone will feel the effect of tightening supplies, says Lester Lave, Harry B. and James H. Higgins Professor of Economics and University Professor; Director, Carnegie Mellon Green Design Initiative; Co-Director, Carnegie Mellon Electricity Industry Center. Lave says higher prices in the South, Midwest, and Southeast will translate into higher prices around most of the nation.

Market News International, 9/17/2008
Goodfriend proposed Fed expansion of policy tools by paying interest on reserves
Paying interest on reserves could help the Federal Reserve expand its policy tools, says Marvin Goodfriend, Professor of Economics; Chairman, The Gailliot Center for Public Policy. Goodfriend, who once worked for the Richmond Fed, proposed the idea as far back as 2002.

Bloomberg, 9/17/2008
Goodfriend: Fed trying to set rules mid-stream
The Federal Reserve’s decision to take over American International Group Inc. put the central bank in the position of picking winners and losers just two days after it left Lehman Brothers to bankruptcy. Marvin Goodfriend, Professor of Economics; Chairman, The Gailliot Center for Public Policy, calls it “a very bad situation” and notes that the central bank is trying to set rules in the middle of the game.

Pittsburgh Tribune-Review, 9/17/2008
Apt: No perfect solution when it comes to power line protection
There is a limit to what can be done to protect power lines from severe weather, according to Jay Apt, Executive Director, Electricity Industry Center; Associate Research Professor; Distinguished Service Professor in Engineering and Public Policy. Burying lines is costly and makes them vulnerable to flooding and harder to access when repairs are needed, he says.

Reuters, 9/18/2008
Fed close to exhausting lending capacity, says Goodfriend
The Federal Reserve is very close to using up its lending capacity, which is unprecedented, according to Marvin Goodfriend, Professor of Economics; Chairman, The Gailliot Center for Public Policy. The Fed has run down its balance sheet with a series of costly rescue moves, culminating in a deal for AIG.

New York Times, 9/19/2008
Reconstruction Finance Corporation only historical parallel to rival bailout proposal, says Meltzer
The only historical parallel that rivals the government’s proposed rescue plan for Wall Street is the Reconstruction Finance Corporation, says Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. That institution worked because its leader ran it with autonomy and no nonsense, Meltzer says — something he doubts would work with Congress.

Bureau of National Affairs, Inc., 9/19/2008
Proposal is unprecedented and problematic, Spatt says
A proposed requirement for hedge funds to disclose daily their short positions is unprecedented and problematic, says Chester Spatt, Mellon Bank Professor of Finance; Director, Center for Financial Markets. Among other issues, the proposal would lead to needless cost increases and expose the market to short squeezes, Spatt says.

Associated Press, 9/20/2008
Goodfriend: Government should be able to pick a price for troubled assets
The government should be able to pick a price for the troubled assets associated with the Wall Street bailout proposal that will help the banks but also allow the government to make a profit down the line, says Marvin Goodfriend, Professor of Economics; Chairman, The Gailliot Center for Public Policy. Experts say the plan to buy up $700 billion in bad mortgages may not be enough to save some banks.

Voice of America, 9/20/2008
Meltzer: Avoid using government action to stabilize market
Government action to bring stability to the market is a socialistic approach that should be avoided, says Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. President Bush and Treasury Secretary Henry Paulson announced the action, which would cost billions, earlier in the week.

BusinessWeek, 9/21/2008
BusinessWeek names Tepper School Web site best among Top 20 MBA programs
The Tepper School’s Web site won the approval of BusinessWeek, which praised its “clear and thoughtful layout” and “complete, informative content.” The magazine recently named the website winner of a competition among the sites of its Top 20 MBA programs.

Wall Street Journal , 9/22/2008
Little will change in Fed’s role, Meltzer says
The Federal Reserve lost its independence by being too much under the thumb of Wall Street and politicians recently, but very little will change in the Fed’s role, says Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. If Fed officials come under attack, Wall Street will be among the defendants, and many bankers nationwide would be loyal to the central bank.

USA Today, 9/22/2008
Economy in a ‘danger period’ until housing prices bottom out, says Goodfriend
The American economy will be in a “danger period” for the next six or eight months, says Marvin Goodfriend, Professor of Economics; Chairman, The Gailliot Center for Public Policy. Goodfriend says that period will last until the time when housing prices are expected to bottom.

Business Spectator, 9/22/2008
Fed will need to think about codified central policy, Goodfriend says
The Federal Reserve has always had two broad policies at its disposal: Monetary policy and codified central policy, according to Marvin Goodfriend, Professor of Economics; Chairman, The Gailliot Center for Public Policy. Goodfriend believes officials will need to think about the latter, which has come into play as the Fed has extended loans to various parts of the financial system.

National Public Radio, 9/22/2008
Goodfriend: Great Depression and current financial crisis differ significantly
Although people are comparing the current financial crisis with the Great Depression, there are some big differences, according to Marvin Goodfriend, Professor of Economics; Chairman, The Gailliot Center for Public Policy. Goodfriend appeared on National Public Radio to discuss the comparison.

Wall Street Journal , 9/23/2008
History supports resistance to bailouts, Meltzer says
In past crises rivaling Wall Street’s current financial problems, the government resisted the urge to bail out the markets, and nothing terrible ensued, says Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. Among the examples Meltzer cites is President Nixon’s decision not to rescue the commercial-paper market after the collapse of the Penn Central railroad.

Bloomberg, 9/23/2008
Lawyers may have hobbled SEC, says Spatt
At the Securities and Exchange Commission, the staff composition has been skewed toward lawyers for too long, according to Chester Spatt, Mellon Bank Professor of Finance; Director, Center for Financial Markets. That has arguably hobbled the SEC’s ability to deal with important market issues, Spatt says.

New York Times, 9/23/2008
Meltzer: Dire warnings related to bailout proposal are scare tactics
The proposal to bail out Wall Street is in the private but not the public interest, says Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. Meltzer believes Treasury Secretary Henry Paulson’s dire warnings about what would happen if the proposal does not pass are nothing more than scare tactics.

Wall Street Journal, 9/23/2008
Congress gave Fed power to act in a crisis, says Meltzer
Congress gave the Federal Reserve the power to act in the event of an imminent crisis, notes Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. Attacks on the Fed by Democratic and Republican members of Congress are unusual, particularly in the area of monetary policy.

Securities Law Daily News, 9/23/2008
Spatt reiterates concerns over ban on short selling
Some Securities and Exchange Commission amendments to its temporary emergency order banning short sales partially address the implementation concerns voiced by the market, says Chester Spatt, Mellon Bank Professor of Finance; Director, Center for Financial Markets. However, Spatt reiterated his concern that the SEC’s emergency short sale ban is problematic in light of the importance of shorting to the liquidity process.

PBS, 9/24/2008
Market-based solution is a better alternative to financial crisis, says Meltzer
AIG turned down three offers to buy the company because it thought it would get a better deal from the government, says Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. He believes the government needs to extract itself from the Wall Street financial crisis, and see if a market solution will emerge instead.

Radio Free Europe, 9/25/2008
Meltzer: Private money is available for troubled firms
Count Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy, among those who doubt the disastrous forecast issued by government officials if no bailout agreement can be reached. Meltzer says private money is available to troubled firms if the government is willing to get out of the way. URL for this article: http://www.truthnews.net/month/2008090203.htm

The University Register, 9/26/2008
Taxpayers not the only route to salvation, says Meltzer
Taxpayer money is not the only way out for ailing firms, says Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. Meltzer points to Lehman Brothers, most of whose assets were sold within three days after the government let it fail. URL for this article: http://www.universityregister.org/index.php?option=com_content&task=view&id=604&Itemid=29

Pittsburgh Business Times, 9/26/2008
Tepper School predicting upswing in MBA applications
The Tepper School is expecting an upswing in applications this fall for next year’s entering class, says John Mather, Executive Director, Masters Programs; Teaching Professor of Marketing. Dramatic market shake-ups tend to push undecided MBA applicants off the fence. URL for this article: http://www.bizjournals.com/pittsburgh/stories/2008/09/29/story1.html?b=1222660800^1706226&brthrs=1

Pittsburgh Tribune-Review, 9/26/2008
Meltzer: Public unhappy with bailout proposal
The Bush administration has not made a good case that its proposed $700 billion Wall Street bailout will solve the nation’s economic problems, says Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. After a TV news interview in which Meltzer opposed the bailout, he says he received 70 e-mails, all of them agreeing with him — which Meltzer says indicates the public is not sold on the idea.

Pittsburgh Tribune-Review, 9/28/2008
Short selling can reflect negative feelings about a stock, says Spatt
Some short sellers use the process, which has been temporarily banned by the Securities and Exchange Commission, because they are unhappy with a company’s direction, says Chester Spatt, Mellon Bank Professor of Finance; Director, Center for Financial Markets. Spatt says when an investor has a negative feeling about a stock, shorting is a way to express those feelings. URL for this article: http://www.pittsburghlive.com/x/pittsburghtrib/business/s_590540.html

Family Security Matters, 9/29/2008
U.S. has endured serious crises before, Meltzer says
The United States has faced serious problems such as the Wall Street financial crisis before, most recently during the banking problems of the early 1990s, says Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. Meltzer says because banks lend long-term and borrow short-term, “Crises occur when the market changes.” http://www.familysecuritymatters.org/publications/id.1303/pub_detail.asp

Inc.com, 9/29/2008
Meltzer: Firms are still lending
Firms are lending money, contrary to dire predictions about the state of the economy, says Allan Meltzer, The Allan H. Meltzer University Professor of Political Economy. Meltzer says while commercial and industrial loans have not been going up fast, they have been going up. URL for this article: http://blog.inc.com/the-entrepreneurial-agenda/2008/09/the_bailout_blues.html

Bloomberg, 9/29/2008
Goodfriend: Allowing payment of interest on reserves will enable Fed to separate credit, monetary policies
Allowing payment of interest on reserves will enable the Federal Reserve to have credit policy that’s independent of its monetary policy, says Marvin Goodfriend, Professor of Economics; Chairman, The Gailliot Center for Public Policy. Until now, the Fed indirectly achieved its target by buying or selling bonds on the open market, but paying interest on reserves puts a floor on the overnight rate, allowing the Fed to inject liquidity without driving down rates. URL for this article: http://www.bloomberg.com/apps/news?pid=20601068&sid=ak0Npsdf78js&refer=home

The Tartan, 9/29/2008
Cofield: College rankings playing a large role in applications process
College selection may have been significantly clouded by data from rating and ranking organizations, says Milton Cofield, Executive Director, B.S. in Business Administration Program; Associate Teaching Professor of Business Management. Cofield says college rankings, which factor in SAT scores, have become a huge factor in the larger picture of college applications. URL for this article: http://www.thetartan.org/2008/9/29/news/tests

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