The Journal of The Journal of Economic Perspectives Economic Perspectives The Journal of Spring 2015, Volume 29, Number 2 Economic Perspectives Symposia The Bailouts of 2007–2009 Austan D. Goolsbee and Alan B. Krueger, “A Retrospective Look at Rescuing and Restructuring General Motors and Chrysler” W. Scott Frame, Andreas Fuster, Joseph Tracy, and James Vickery, “The Rescue of Fannie Mae and Freddie Mac” Charles W. Calomiris and Urooj Khan, “An Assessment of TARP Assistance to Financial Institutions” Robert McDonald and Anna Paulson, “AIG in Hindsight” Phillip Swagel, “Legal, Political, and Institutional Constraints on A journal of the the Financial Crisis Policy Response” American Economic Association Disability Insurance Jeffrey B. Liebman, “Understanding the Increase in Disability Insurance Benet 29, Number 2 Spring 2015 Volume Receipt in the United States” Pierre Koning and Maarten Lindeboom, “The Rise and Fall of Disability Insurance Enrollment in the Netherlands” James Banks, Richard Blundell, and Carl Emmerson, “Disability Benet Receipt and Reform: Reconciling Trends in the United Kingdom” Articles Darrell Dufe and Jeremy C. Stein, “Reforming LIBOR and Other Financial Market Benchmarks” Rainer Böhme, Nicolas Christin, Benjamin Edelman, and Tyler Moore, “Bitcoin: Economics, Technology, and Governance” Konstantin Kashin, Gary King, and Samir Soneji, “Systematic Bias and Nontransparency in US Social Security Administration Forecasts” Recommendations for Further Reading Spring 2015 The Journal of Economic Perspectives A journal of the American Economic Association Editor Enrico Moretti, University of California at Berkeley Co-editors Gordon Hanson, University of California at San Diego Ulrike Malmendier, University of California at Berkeley Associate Editors Anat Admati, Stanford University Amy Finkelstein, Massachusetts Institute of Technology Adam Looney, US Department of the Treasury Emi Nakamura, Columbia University Richard Newell, Duke University Scott Stern, Massachusetts Institute of Technology Christopher Udry, Yale University Managing Editor Timothy Taylor Assistant Editor Ann Norman Editorial offices: Journal of Economic Perspectives American Economic Association Publications 2403 Sidney St., #260 Pittsburgh, PA 15203 email: [email protected] The Journal of Economic Perspectives gratefully acknowledges the support of Macalester College. Registered in the US Patent and Trademark Office (®). Copyright © 2015 by the American Economic Association; All Rights Reserved. Composed by American Economic Association Publications, Pittsburgh, Pennsylvania, USA. Printed by R. R. Donnelley Company, Jefferson City, Missouri, 65109, USA. No responsibility for the views expressed by the authors in this journal is assumed by the editors or by the American Economic Association. THE JOURNAL OF ECONOMIC PERSPECTIVES (ISSN 0895-3309), Spring 2015, Vol. 29, No. 2. The JEP is published quarterly (February, May, August, November) by the American Economic Association, 2014 Broadway, Suite 305, Nashville, TN 37203-2418. Annual dues for regular membership are $20.00, $30.00, or $40.00 depending on income; for an additional $15.00, you can receive this journal in print. E-reader versions are free. For details and further information on the AEA go to https://www.aeaweb.org/. Periodicals postage paid at Nashville, TN, and at additional mailing offices. POSTMASTER: Send address changes to the Journal of Economic Perspectives, 2014 Broadway, Suite 305, Nashville, TN 37203. Printed in the U.S.A. The Journal of Economic Perspectives Contents Volume 29 • Number 2 • Spring 2015 Symposia The Bailouts of 2007–2009 Austan D. Goolsbee and Alan B. Krueger, “A Retrospective Look at Rescuing and Restructuring General Motors and Chrysler” ..................3 W. Scott Frame, Andreas Fuster, Joseph Tracy, and James Vickery, “The Rescue of Fannie Mae and Freddie Mac” ..............................25 Charles W. Calomiris and Urooj Khan, “An Assessment of TARP Assistance to Financial Institutions” ........................................ 53 Robert McDonald and Anna Paulson, “AIG in Hindsight” .................. 81 Phillip Swagel, “Legal, Political, and Institutional Constraints on the Financial Crisis Policy Response” ...................................... 107 Disability Insurance Jeffrey B. Liebman, “Understanding the Increase in Disability Insurance Benefit Receipt in the United States” .......................... 123 Pierre Koning and Maarten Lindeboom, “The Rise and Fall of Disability Insurance Enrollment in the Netherlands” ...................... 151 James Banks, Richard Blundell, and Carl Emmerson, “Disability Benefit Receipt and Reform: Reconciling Trends in the United Kingdom” . 173 Articles Darrell Duffie and Jeremy C. Stein, “Reforming LIBOR and Other Financial Market Benchmarks” ........................................ 191 Rainer Böhme, Nicolas Christin, Benjamin Edelman, and Tyler Moore, “Bitcoin: Economics, Technology, and Governance” .............. 213 Konstantin Kashin, Gary King, and Samir Soneji, “Systematic Bias and Nontransparency in US Social Security Administration Forecasts” ..239 Features Timothy Taylor, “Recommendations for Further Reading” .................259 Statement of Purpose The Journal of Economic Perspectives attempts to fill a gap between the general interest press and most other academic economics journals. The journal aims to publish articles that will serve several goals: to synthesize and integrate lessons learned from active lines of economic research; to provide economic analysis of public policy issues; to encourage cross-fertilization of ideas among the fields of economics; to offer readers an accessible source for state-of-the-art economic thinking; to suggest directions for future research; to provide insights and read- ings for classroom use; and to address issues relating to the economics profession. Articles appearing in the journal are normally solicited by the editors and associate editors. Proposals for topics and authors should be directed to the journal office, at the address inside the front cover. Policy on Data Availability It is the policy of the Journal of Economic Perspectives to publish papers only if the data used in the analysis are clearly and precisely documented and are readily available to any researcher for purposes of replication. Details of the computations sufficient to permit replication must be provided. The Editor should be notified at the time of submission if the data used in a paper are proprietary or if, for some other reason, the above requirements cannot be met. Policy on Disclosure Authors of articles appearing in the Journal of Economic Perspectives are expected to disclose any potential conflicts of interest that may arise from their consulting activities, financial interests, or other nonacademic activities. Journal of Economic Perspectives Advisory Board Janet Currie, Princeton University Franceso Giavazzi, Bocconi University Claudia Goldin, Harvard University Robert E. Hall, Stanford University Greg Ip, Wall Street Journal Hongbin Li, Tsinghua University John Roemer, Yale University Paul Romer, New York University Howard Rosenthal, New York University Journal of Economic Perspectives—Volume 29, Number 2—Spring 2015—Pages 3–24 A Retrospective Look at Rescuing and Restructuring General Motors and Chrysler† Austan D. Goolsbee and Alan B. Krueger he rescue of the US automobile industry amid the 2008–2009 recession and financial crisis was a consequential, controversial, and difficult decision T made at a fraught moment for the US economy. Both of us were involved in the decision process at the time, but since have moved back to academia. More than five years have passed since the bailout began, and it is timely to look back at this unusual episode of economic policymaking to consider what we got right, what we got wrong, and why. We are pleased and a bit surprised by how well the last five years have played out for the domestic auto industry. At a critical point in the internal debate over the auto industry bailouts in March 2009, Larry Summers, at that time director of the National Economic Council, assembled members of the Obama administra- tion’s economic and autos team around his cramped table in the West Wing of the White House. He held a straw vote on whether the advisors believed Chrysler would survive for five years if a government-supported merger with Fiat went through. A narrow majority, including us, voted no. Five years on, both General Motors and Chrysler have survived, rebounded, and, by many metrics, appear healthy. ■ Austan D. Goolsbee is Robert P. Gwinn Professor of Economics, University of Chicago, Chicago, Illinois. He was a member of the Council of Economic Advisers from March 2009 to September 2010, and Chairman of the Council from September 2010 to August 2011. Alan B. Krueger is Bendheim Professor of Economics and Public Affairs, Princeton University, Princeton, New Jersey. He was Assistant Secretary for Economic Policy and Chief Economist at the US Treasury Department from 2009 to 2010, and Chairman of the Council of Economic Advisers from November 2011 to August 2013. Their email addresses are goolsbee@chicago booth.edu and [email protected]. † To access the Data Appendix and disclosure statements, visit http://dx.doi.org/10.1257/jep.29.2.3 doi=10.1257/jep.29.2.3 4 Journal of Economic Perspectives Economic analysis contributed throughout the process of deciding how to respond to the auto companies’ requests for extraordinary support, and President