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May 20, 2013

Richard A. Serrano: Is Meir Kahane's assassin now a changed man?

Hannan Adely: Town raises Palestinian flag at City Hall

Melissa Healy: Genetic copies of living people from embryos no longer science fiction
Morgan Housel: When smart investors do stupid things

Sharon Saloman, M.S., R.D.: Hunger games: Eat more, weigh less, without starving

Jewz in the Newz by Nate Bloom : Jews Inducted into Rock Hall of Fame; Anton Yelchin co-stars in New "Trek" film; Kutcher (but not Kunis) visits Israel; Jewish TV Star Praises Jewish Rap Star

The Kosher Gourmet by Cathy Pollak: WARNING: This WALNUT CAKE WITH PRALINE FROSTING, perfect for afternoon coffee, is addicting
May 13, 2013

Rabbi Nathan Lopes Cardozo: Why the giving of the document that would permanently change the world could only be done in desolation

David G. Savage: Church-state, literally? Supreme Court weighing public school graduation in a church

Emily Alpert: Recession dragged down birth rates for less-educated women
Morgan Housel: The deep downside of home ownership

Peter Teffer: Will Dutch police soon be stalking cybercriminals on your computer?

Heidi McIndoo, M.S., R.D.: Meatless 'meat' can have its own set of problems

The Kosher Gourmet by Diane Rossen Worthington: Celebrate! This must-try appetizer is delicate yet has depth of flavor: Corn-Leek Cakes with Caviar, Smoked Salmon and Creme Fraiche

May 10, 2013

Rabbi Berel Wein: Be all that you should be

Caroline B. Glick: The dirty little secret about Israel's Arabs

Mona Charen: Hawking's Moral Calculus: The man and the movement he embraces
Morgan Housel: The biggest retirement myth ever told

Sandi Doughton: Eyes may provide new insight into brain problems

Jewz in the Newz by Nate Bloom : The Great Gatsby's Jewish Ties; Jews in the "Time 100 list" List; People's Most Beautiful Women

The Kosher Gourmet by Linda Gassenheimer: A sweet-hot meal: Pear salsa spices up salmon

May 8, 2013

Peter Ford: Why China is welcoming both Israel's Netanyahu and Palestinians' Abbas

Warren Richey: Obama administration quietly backs out of appeal over new contraceptive mandate

Fred Weir: At Kerry-Putin meeting, US-Russia relations thaw --- a tad
Amanda Paulson: Study reveals sad truths about community colleges

Harvard Health Letters: Evidence weak that zinc, echinacea are beneficial

The Kosher Gourmet by Leela Cyd Ross : Almost too pretty to eat, this colorful salad with Sicilian inspiration will tickle the taste buds and delight your visual sensibility

May 6, 2013

Edmund Sanders and Patrick J. McDonnell: Think Israel's objective in Syria is to weaken Assad or embolden the rebels? Think again

Brian Bennett: Israeli airstrikes may show weakness in Syrian defense

Michael Ollove: Millions of ex-felons, parolees and those on probation are about to be entitled to tax-payer paid health coverage
Karen Kaplan: Most men can skip PSA test for prostate cancer, urologists say

Kimberly Lankford: How to track down a lost life insurance policy

Dream of Mars exploration achievable, experts say

The Kosher Gourmet by Susan M. Selasky: EGGPLANT WRAPS are an easy, sumptuous and scrumptious meal

May 3, 2013

Rabbi Nathan Lopes Cardozo: Human Courage and the Unavoidable, Disturbing Text

Steven Emerson: Attorney General Fights CAIR in Court, Lauds it in Public

Mediterranean diet helps beat dementia: study
Harvard Health Letters: When to be screened for a hearing problem

Jewz in the Newz by Nate Bloom : Iron Man's Jewish Connections; Marc Maron's New TV Show; Martin Landau Grows Up with Israel; Shalom, Allan Arbus

The Kosher Gourmet by Diane Rossen Worthington: A sweet surprise for Mother's Day dessert

May 1, 2013

Jonathan Rosenblum: An Improbable Journey to Orthodoxy

Jonathan Tobin: Blame Obama, Not Israel for Syria Push

Kids, kittens the Same? With employee perks at struggling Internet pioneer Yahoo! it's hard to tell
Halena M. Gazelka, M.D.: Mayo Clinic Medical Edge: What you need to know about implanted pain relief devices

Sandy Kleffman: Artificial kidney offers hope to patients tethered to a dialysis machine

Jessica Shugart: When it comes to math, MRIs may be better than IQs

The Kosher Gourmet by Mario Batali: The celebrated chef on how high-maintenance ASPARAGUS RISOTTO need not be

April 29, 2013

Roy Gutman: Poland's new Jewish museum celebrates life, doesn't revisit Holocaust

Mark Clayton: Terrorism in America: Is US missing a chance to learn from failed plots?

Kim Murphy: Boston Bomber's 'Svengali' Revealed
Morgan Housel: He's rich, smart and old: Listen to him

Thomas Salinas, D.D.S.: Mayo Clinic Medical Edge: The safety of amalgam fillings

Harvard Health Letters: Tomatoes and stroke protection

Pete Spotts: Tiny satellites + cellphones = cheaper 'eyes in the sky' for NASA

The Kosher Gourmet by Diane Rossen Worthington: Swing into spring with lemon cream pie

April 26, 2013

Rabbi Abraham J. Twerski: The world is a mirror

Caroline B. Glick: Time to confront Obama

Clifford D. May: Defense in the Age of Jihadist Terrorism
Kimberly Lankford: New strategies ease pain of paying for long-term care insurance

Howard LeWine, M.D.: Ask the Harvard Experts: Too much ibuprofen?

Sharon Palmer, R.D.: How to feel your best -- with plenty of energy, a healthy weight and optimal mental and physical function -- without driving yourself batty

Jewz in the Newz by Nate Bloom: Jewish Major Leaguers, 2013; New Movies and Comedy Show; Shalom, 'Lumpy' (Leave it to Beaver)

The Kosher Gourmet by Emily Ho : A bright and cheerful salad to herald the warmer months ahead

April 24, 2013

Steven Emerson: Boston Bomber Exposes Islamist Secret

Morgan Housel Admit it: No one has any idea what's going on
Harvard Health Letters: Can you get headaches from headache medication?

Kerri-Ann Jennings, M.S., R.D.: How to easily get more Omega-3s in your diet

Melissa Healy: Pot in a pill: All the pain relief without the smoke

The Kosher Gourmet by Susan Russo: Chipotle Chili Butternut Squash Soup is bold, zesty, hot

April 22, 2013

Ken Dilanian: Counterterrorism's future is unclear

US man departing country arrested on terror charges
Barbara Williams: An unorthodox but growing treatment in a 9-year-old's battle against cancer

P.J. Skerrett, M.D.: How to recognize a good whole grain product

Jewz in the Newz by Nate Bloom: Teen actor Jonah Bobo in New Flick: Hunky James Wolk on Mad Men; Erich Segal's Daughter Writes Prize-Winning Jewish Novel


Jewish World Review Sept. 21, 2007 / 9 Tishrei 5768

More risky business

By Mort Zuckerman

Mort Zuckerman
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http://www.JewishWorldReview.com | Earthquakes have taught vulnerable countries to impose stricter architectural standards so that buildings don't fall down at the first tremor. Something like that will have to follow the shock to our new financial architecture, now experiencing its first major crisis. The danger is that the credit crunch, moving with unnerving speed, may hit Main Street, and not just Main Street in America but in many of the world's major financial centers.


Before the 1930s, the greatest threat to financial stability came from bank runs. The Federal Deposit Insurance Act was passed to protect deposits and calm the panic that caused people to rush to take their money out. There is no such protection in the new financial architecture, built on securities rather than bank loans. We're now in a world where loans are packaged, sold, and resold to a chain of investors around the globe. With everyone having sold risk to everyone else, no one is sure where the losses are or how much the value of these securities has fallen. In this new financial realm, there is no equivalent of deposit insurance to maintain confidence, much less the price of the underlying assets.


Mortgage lenders, money market mutual funds, hedge funds, and investment banks risk losing the source of their funds, such as short-term IOUs, by which they had financed these securities. What we have is the 21st-century version of a bank run.


Iffy IOUs. These short-term IOUs, known as asset-backed commercial paper, represent about $1 trillion and were bought because they were rated AAA. They seemed to have the backup of solid collateral, but now no one knows for sure whether the assets backing the paper are worth what the issuers say, given that a proportion of these assets are those iffy subprime mortgages, which have contaminated the whole category.


The valuation of these assets was determined by sophisticated mathematical models rather than by the market, since they were rarely traded. But the models were based on simulations of the past—a past that did not capture the lax credit standards of subprime loans (for homes bought on speculation with virtually no equity)—nor did they assess the prospects of a sharp decline in the price of real estate. Adding to the uncertainty is the knowledge that hedge funds had every incentive to over-value their assets, since they receive a fee of 2 percent of the asset value of holdings plus a 20 percent participation in the appreciation.


Now, nobody knows who has lost or how much. How to distinguish solvent from shaky borrowers? The new financial architecture dispersed risk—which was passed from buyer to buyer—but it also dispersed trust. Even the banks no longer trust other banks enough to lend them money, except on onerous terms. Hence we face a credit crunch and a liquidity crisis that may yet cause runs on otherwise solvent financial institutions.


Lenders facing uncertainty have pushed up rates on all debt other than U.S. treasuries. Risk is back big time as the spread between junk bond rates and treasuries has more than doubled after a sharp fall from 2001. Then, the spread between the average junk bond and the 10-year treasury bond was more than 9 points; earlier this year, it hit a low of about 2.6 percentage points before heading up.


Can the central banks come to the rescue? There are limits. Cheaper money from the Fed will not necessarily restore the value of this paper. If these assets have been de-rated or down-rated by the credit rating agencies, changes in interest rates won't reverse most of the loss of wealth.


For the moment, the Fed and the European Central Bank have been injecting liquidity into bank reserves. But the banks, meanwhile, have been cutting back on their lending, making it more difficult for the Fed to transmit liquidity to the rest of the financial system through them: Most of the doubtful paper is held by hedge funds, investment banks, and similar institutions.


Indeed, the Fed can do little to control the behavior of these bodies that have to decide whether to hold on or conduct fire sales. This is a new world of finance. Lowering the discount rates of loans to banks will not suffice. The best that the Fed can do is cut the federal funds rate so as to lower the cost and increase the availability of funds. That would give lenders the time to sort out their mistakes.


But we must understand that no one knows where this market turmoil will lead or where it will end. Lower interest rates cannot make up for the decline in asset pricing, at a time when foolish borrowers decided to borrow what they could not afford and foolish investors invested in what they did not understand.


While the Federal Reserve hesitates, we've run out of fools. The Fed must take into account the potential lrisks posed to economic growth by the new seismic tremors.

Every weekday JewishWorldReview.com publishes what many in in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.

JWR contributor Mort Zuckerman is editor-in-chief and publisher of U.S. News and World Report. Send your comments to him by clicking here.

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