Of course, scapegoats are intrinsic to the language of politics. And scapegoats are particularly useful to ignorant politicians. The fact is that most politicians do not know the slightest about how finance—public or private—actually operates. It is for them a matter of good and evil—mostly good when prosperity reigns, mostly evil when prosperity collapses.
Some two dozen executives from large corporations will be descending on Capitol Hill today to make the case against over-regulating derivatives. The “fly-in” is being organized in part by the U.S. Chamber of Commerce through a group called the Coalition for Derivatives End-Users, according to the Chamber’s Ryan McKee. Many corporations use derivatives to hedge against fluctuations in the price of their inputs—for example, an airline might sign a contract to lock in future fuel prices, thereby passing the risk along to someone else.
[Guest post by Noam Scheiber:] The Times' Sewell Chan and Eric Dash have a great little piece about Bill Thomas, the volatile former Republican chairman of the House Ways and Means Committee, now vice chairman the the congressionally-chartered Financial Crisis Inquiry Commission (FCIC). In a nutshell, Thomas is--how to put it?--a preening, self-righteous bully* who seems more interested in scoring rhetorical points than figuring out what caused the crisis.
Last week, Alabama Republican Richard Shelby, the ranking member of the Senate Banking Committee, floated a compromise on the consumer financial protection agency that’s currently stalled in the Senate. Under the bill Chairman Chris Dodd moved through the committee in March, the consumer agency would effectively have its own budget and an independent, White House-appointed director. It would also have significant (but not unchecked) authority to write and enforce rules protecting consumers from abusive bank practices, like deceptive mortgages.
Now, mind you, the median income (including “salaries, bonuses, long-term incentives, and grants of stock and stock options”) of chief executive officers of 200 major American corporations, according to the WSJ, dropped by fully 0.9% to a measly $6.95 million. And, in the long-term incentive category, the median fell 4.6% to $5 million. But $7 million (or even $5 million) are not, as my uncle used to say, bupkes. These horribly depressed pay statistics include Steve Jobs at $1 and Warren Buffett at $100,000, which means that they are also artificially depressed.
[Guest post by Noam Scheiber:] I've long been of the view that the Treasury secretary gets a bad rap despite some rather impressive accomplishments. That's true even when it comes to reforming Wall Street, where, despite some reservations, I think the administration dropped a pretty solid reform proposal last year. (In fact, to the extent the reform effort has been weakened in Congress, it's generally because it's drifted away from the principles the administration laid out.) Still, you don't normally see Geithner get worked up about reform in public--or really about anything for that matter.
The Wall street Journal reports today that Lee Sachs, a counselor to Treasury Secretary Tim Geithner, will be leaving the administration in April. Since the early days of the transition in 2008, Sachs has generally been the senior Treasury aide in charge of overseeing the administration’s response to the financial crisis.
In a few weeks, Barack Obama will have a chance to do something he hasn’t done particularly well during his first year in office: successfully defy his opponents and, at the same time, reassure his most loyal supporters. At issue is the fate of Craig Becker, one of Obama’s nominees for the National Labor Relations Board (NLRB). Last month, Becker was denied a vote on his nomination when Senate Democrats failed to overcome a GOP filibuster. Now, the Senate’s coming Easter break will give Obama an opportunity to put Becker on the NLRB via recess appointment.
An interesting op-ed, “It is time to treat Wall Street like Main Street,” appeared in Thursday’s Financial Times. Written by George Akerlof, a professor of economics at Berkeley and a Nobelist in 2001, and Rachel Kranton, a professor of economics at Duke, this little (but challenging) piece follows from their recent book Identity Economics, which I have not read and probably could not understand. The book itself follows from an essay, “Economics and Identity,” published by the Quarterly Journal of Economics in 2000. I think I understand it. In any case, A. and K. are literate and funny.
One way to judge the health of our political system is to divide the president’s agenda into three categories. First are the items that seem like they’d be hard to accomplish and actually are hard—health care reform and cap-and-trade come to mind. Then come the items that sound easy to the uninitiated but turn out to be pretty hard—like eliminating wasteful farm subsidies or obsolete weapons systems. Lots of presidents have taken on these programs only to find that they have powerful, well-organized defenders.