Will 30-year fixed-rate mortgages disappear if the federal government doesn't guarantee them via Fannie Mae and Freddie Mac? Dean Baker cries foul:

This can easily be shown not to be true by the market in jumbo mortgages. These are mortgages that are too large in value to be insured by the GSAs. A large share of these mortgages are 30-year fixed rate mortgages. Also, while it is less common today, prior to the housing bubble banks did hold a substantial share of their mortgages, typically around 10-20 percent. Since the government was not guaranteeing these mortgages, the banks must have felt the guarantee was unnecessary to get them to issue 30-year fixed rate mortgages.

I'd add that most other countries don't have agencies like Fannie and Freddie, but manage to have robust mortgage markets anyway. (Sometimes a bit too robust.) It's true, I think, that the traditional 30-year fixed is a bit of a historical artifact in the U.S. that isn't common elsewhere, but so what? There's no reason to stay hooked on the 30-year fixed just because it's been around for a long time. We should be concerned with proper regulation of the mortgage market—down payment requirements, income requirements, interest rate limitations, etc.—not with saving a particular kind of mortgage. Variable-rate mortgages work fine throughout the world with proper regulation but without GSAs like Fannie and Freddie, and they can work fine here.

Fannie and Freddie need to be wound down gradually. There's no need for a big bang. But they're relics of an earlier age and we should be willing to get rid of them.

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I've now read the new study of the Oregon Medicaid experiment, as well as some additional commentary on it, and I think some of the results are important enough that they deserve a new post, not just updates to the previous post.

In a nutshell, Oregon held a lottery a few years ago in which some people received Medicaid coverage and others didn't. Today's study is a two-year followup, and the headline result is that "Medicaid coverage generated no significant improvements in measured physical health outcomes." But it turns out that "significant" is doing a lot of heavy lifting here, and the headline is extremely misleading.

In fact, the study showed fairly substantial improvements in the percentage of patients with depression, high blood pressure, high cholesterol, and high glycated hemoglobin levels (a marker of diabetes). The problem is that the sample size of the study was fairly small, so the results weren't statistically significant at the 95 percent level.

However, that is far, far different from saying that Medicaid coverage had no effect. It's true that we can't say with high confidence that it had an effect, but the most likely result is that it did indeed have an effect. The table below shows the point estimates. Note also that in all cases, the use of prescribed medication went up, in some cases by a lot.

Bottom line: It's more likely that access to Medicaid did improve health outcomes than that it had zero or negative effects. It's just that the study was too small to say that with certainty. For laymen, as opposed to stat geeks, the headline result of the Oregon study was "Possibly positive but inconclusive," not "Had no effect."

UPDATE: Even if they're real, are these results worth the money spent? That's a different question, and there's just no way to answer it with this study. That would require a much larger, longer-term research project.

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From the Federal Reserve, explaining why the economic recovery remains sluggish:

Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth.

This is an unusually straightforward statement from the Fed. They're basically saying that the fiscal cliff deal and the sequester spending cuts are acts of idiocy. We should be spending more and taxing less right now, not the other way around. Belt tightening needs to wait another couple of years.

But tighten we do. Economic growth is not in the political interests of the Republican Party at the moment, so they're not going to allow it. End of story.

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The New York Times reports today on Sohel Rana, owner of the factory building that collapsed last week and now the most hated man in Bangladesh:

To build Rana Plaza, Mr. Rana and his father bullied adjacent landowners, the landowners themselves say, and ultimately took their property by force. His political allies gave him a construction permit, despite his dubious claims of title to the land, and a second permit later to add upper floors that may have destabilized the building.

....Then on April 23, a problem arose. Workers on the third floor were stitching clothing when they were startled by a noise that sounded like an explosion. Cracks had appeared in the building. Workers rushed outside in terror.

By late morning, Mr. Rana’s representatives had brought in Abdur Razzaque Khan, an engineer. Taken to the third floor, Mr. Khan examined three support pillars, and became horrified at the cracks he found. “I became scared,” Mr. Khan said. “It was not safe to stay inside this building.”

He rushed downstairs and told one of Mr. Rana’s administrators that the building needed to be closed immediately. But Mr. Rana was apparently not impressed; he was holding court with about a dozen local journalists. “This is not a crack,” he said, according to Shamim Hossain, a local newspaper reporter. “The plaster on the wall is broken, nothing more. It is not a problem.”

Will this become the Triangle Shirtwaist Fire of Bangladesh? Possibly, though it's worth remembering just how long and how hard the battle for safer working conditions was even after the Triangle disaster. To get a sense of just how difficult it's going to be to change things in Bangladesh, click the link and read the whole sordid story.

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