There are reasons everyone talks about executive compensation, but nobody does anything about it. Regarding the latest Obama administration initiative regarding compensation on Wall Street generally, Matthew Yglesias agrees with those who accuse the administration of not doing enough and approvingly cites a Brad DeLong post unfavorably contrasting Wall Street compensation schema to those of Silicon Valley ventures: More »
Today's entry comes from Mark Thoma, who writes in a guest-blog at the Washington Post: The development of the shadow banking system is important because the troubles we are seeing today are not the result of problems in the traditional, regulated sector of the financial industry. The problems began in the unregulated shadow banking system. (Emphases added.) Which entities' failures and near-failures required TARP and other system-saving emergency programs again? More »
Will the US' debt-rating be downgraded from its current AAA-rating? And will it matter if it is? More »
On the same day Ed Liddy resigned as CEO of AIG, the NYT editorialized against a bill that would allow insurance companies to choose between being regulated at the state or federal level. Putting aside the merits of their argument and the sheer surprise value of the NYT arguing against federal regulation of..well, anything, the editorial made certain claims about AIG and its collapse which have become conventional wisdom. But that doesn't mean they're true. More »
Earlier this morning, Amity Shlaes was interviewed on Bloomberg Radio's "Surveillance" program. And she broke some exclusive news: apparently her controversial Depression book "The Forgotten Man" will be coming out in a 120-page illustrated format, aimed at the teenaged/student market. As my namesake would say: It's two years from now, and a Watchmen-style adaptation is available on DVD... Best of all, Shlaes described the upcoming format as a "cartoon" version of… More »
Tyler Cowen: "[A] central lesson of this depression will be how many different ways there are to leverage." Megan argued yesterday in favor of banks returning to their roots as privately held partnerships: More »
Take it away, WSJ: General Motors Corp., nearing a federally imposed deadline to present a restructuring plan, will offer the government two costly alternatives: commit billions more in bailout money to fund the company's operations, or provide financial backing as part of a bankruptcy filing, said people familiar with GM's thinking. (Hat tip to Business Insider.) As co-contributor Jim Manzi pointed out at the time, GM barely pretended to have a viable business… More »
Matt Yglesias recently wrote: Oftentimes regulatory schemes are nothing but outdated ways of maintaining the dominant market position of incumbent operators or other privileged stakeholders. Exactly! And in these times where "regulation" is an all-purpose buzzword, it is worth remembering that the "incumbent operators" and/or "priviliged stakeholders" can be regulators themselves. (Matt clearly knows this already.) More »
When it comes to drawing faith and solace from the headlines, I had thought nothing could top the news that Eliot Spitzer had lost money through Madoff. But with the recent release of the complete list of Madoff's direct victims by the bankruptcy court, that news has some serious competition: More »
In honor of Harry Markopolos' testimony to the SEC about his heroic efforts to alert the SEC to Bernard Madoff's Ponzi scheme, it is worth revisiting his now-famous 2005 report to the SEC and what we can learn from it about the SEC and its failures. I recently had the good fortune to be introduced to a senior attorney in the SEC's enforcement division. Unfortunately, I wasn't quick or brave enough to ask the only question everyone has wanted the SEC to… More »
The WSJ reports that under political and financial pressure, Citigroup is exploring its options for getting out of its stadium naming deal with the Mets. In a statement Monday, Citigroup said that "no TARP capital will be used" for the stadium -- referring to government funds from the Troubled Asset Relief Program. But as it revisits the pact, Citigroup is essentially acknowledging that the volatile political climate could make it untenable for the bank to… More »
Kevin Drum points us to the news that Alison Singer, the former spokeswoman for Autism Speaks, has resigned her post over the organization's continued support for research into the discredited autism-vaccine connection: In general, I disagree with a policy that says, "Despite what this study shows, more studies should be done." At some point, you have to say, "This question has been asked and answered and it's time to move on." We need to be able to say, "Yes, we… More »
If anyone hasn't yet read Noah Millman's magnum opus on rating agencies and their pivotal role in creating our current economic crisis, then stop reading this right away and don't come back until you have. It is one of the best explanations of how structured finance went awry and the rating agencies' role in the disaster. As Millman notes: The ratings agencies have an enormous amount of power: pension funds and insurance companies invest according to their rules;… More »
Henry Blodget had a recent cover story for this magazine about why financial disasters, like the poor, will always be with us. In similar vein, this excerpt from n+1's "Interview with a Hedge Fund Manager" from January 2008 provides a very good example of how, in practice, very smart people set the stage for financial disasters: More »
Michael Lewis' recent cover story in Portfolio on the end of Wall Street has been justly hailed; the anecdotes about Steve Eisman's housekeeper and baby nurse would themselves be worth the newsstand price...er, if you couldn't access it for free online, that is. But I have to quibble with Lewis' big conclusion, which he reaches after a tense reunion with his former CEO, John Gutfreund. After recounting how Gutfreund turned Salmon Brothers from a private… More »
