Can Limits on Executive Pay Solve the Too Big To Fail Problem?
October 23, 2009
On Wednesday, Dan Tarullo, a governor of the Federal Reserve and distinguished law school professor, dismissed breaking up big banks as “more a provocative idea than a proposal” and instead put almost all his eggs in the “creation by Congress of a special resolution procedure for systemically important financial firms.” He stressed: “We are hopeful that Congress will, in its legislative response to the crisis, include a resolution mechanism and an extension of regulation to all systemically important financial institutions” (full speech). This put him strikingly at odds with Mervyn King, gove
October 21, 2009
Macroblog compiles the evidence for a jobless recovery. The CBO on how and when its estimates are made public. Will banking reform dominate the first half of 2010? Look to India to see which global sectors are recovering. Martin Feldstein says companies don't have to worry about future higher taxes.
On Warren Olney’s radio show To The Point yesterday, I had a chance to talk with U.S. Chamber of Commerce management directly regarding the issue posed here last week: Why would an organization representing 3 million small businesses come out in support of our largest banks? My question was picked up and focused by the host. Warren Olney (at the 36:35 mark): “Mr.
Why the Fed Can't Do Consumer Regulation
October 18, 2009
Back in August I flagged an old Larry Summers lecture arguing that agencies (like the Fed) that keep an eye on bank safety and soundness shouldn't also be tasked with looking out for consumers, since the two mandates can conflict. Summers elaborated on this theme in a speech Friday at the Economist's "Buttonwood" conference: [A]ny regulatory agency that has as its primary mission the soundness and profitability of the banking system or the financial system cannot be relied on to pursue objectives that are potentially inconsistent with that overall mandate with sufficient vigor.
The Wall St.-Main St. Divide ... on Wall St.
October 16, 2009
One thing you can't help noticing when you read about third-quarter bank earnings is the huge divide between banks whose revenue depends heavily on trading and investment banking (underwriting, M&A, etc.) and banks whose revenue depends heavily on consumer lending. To put it simply: The banks in the former category--Goldman, JP Morgan*--are doing very well. The banks in the latter category--Citigroup, Bank of America--are performing abysmally. I don't have a ton to say about this, other than that it highlights the limits to what can be accomplished with a "top down" bank bailout.
The White House's Theory Of Bank Size
October 13, 2009
On Friday morning, Diana Farrell--a senior White House official--made a significant statement on NPR’s Morning Edition, with regard to whether our largest banks are too big and should be broken up. “Ms. DIANA FARRELL (Deputy Assistant for Economy Policy): We understand Simon Johnson’s views on this, and I guess the response is the following…. “Ms.
October 09, 2009
Alan Blinder: 25% of jobs are offshore-able. So maybe it's not all bad that job openings are down 50% since 2007 peak. MIT or U. of Chicago: Which developed the better economic dream-team. How New Democrats are helping ease proposed derivatives rules. Why there's nothing morally wrong with walking away from a mortgage. Do mustached men earn more than their clean-shaven counterparts?
October 07, 2009
Study: Calorie posting in NYC restaurants hasn't changed behaviors. Krugman: Why does the Fed insist on reviving shadow banking? Bill Clinton: Bush should have rescued Lehman. Does a tax credit for boosting employment make sense? More signs of a thaw: Sales at eBay rose in Aug. and Sept.
Was the G20 Summit Actually Dangerous?
September 26, 2009
It is easy to dismiss the G20 communique and all the associated spin as empty waffle. Ask people in a month what was accomplished in Pittsburgh and you’ll get the same blank stare that follows when you now ask: What was achieved at the G8 summit in Italy this year? Perhaps just having emerging markets at the table will bring the world closer to stability and more inclined towards inclusive growth, but that seems unlikely. Should we just move on--back to our respective domestic policy struggles? That’s tempting, but consider for a moment the key way in which the G20 summit has worsened our pre
Wall Street's Growth: Like a Big Tumor
September 26, 2009
This chart from Princeton's Hyun Shin is the best illustration I've seen of the unsustainability of the boom in the securities sector: In absolute terms, most sectors grew by a factor of 80 between since 1954. But, at its peak, the non-commercial-bank financial sector had grown by a factor of 800. From Shin: The greater detail afforded by the chart in log scale reveals that the securities sector kept pace with the rest of the economy until around 1980, but then started a growth spurt that outstripped the other sectors.