Economy

Who Will Be the Next Carlos Slim?
October 18, 2009

The U.S. increasingly displays characteristics that we have seen many times in middle-income “emerging markets”--new dimensions of vast inequality, forms of financial instability that benefit the best connected, and consistently easy credit for the privileged. But this raises the question: Who exactly is going to dominate our economic and political landscape moving forward?  In most emerging markets, a major crisis means that some powerful people and their firms fall from grace.

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.

Re-Thinking the Mancession
October 17, 2009

Continuing Catherine Rampell's series charting the employment recession, here are some more graphs from a new paper by St. Louis Fed economists Kristie Engemann and Howard J. Wall.

How Goldman Can Rehabilitate Itself: Go Private
October 16, 2009

I have to say, I'm underwhelmed by the ideas the company is tossing around so far. Per this morning's Times piece: Goldman said Thursday that it would donate $200 million to its charitable foundation (that figure represents 6 percent of its third-quarter profit, or about six days of earnings). Rumors are swirling on Wall Street that Goldman might donate even more money to charity, perhaps as much as $1 billion, in an effort to defuse public resentment directed at the bank. Mr. Blankfein has even urged his free-spending bankers to be mindful of conspicuous consumption.

Worth Reading
October 16, 2009

How states and local governments differ in choosing sources of tax revenue. Some possible negative consequences of zero interest rates. Arkansas has the highest rate of serial marriage. A female economist's view of Elinor Ostrom's Nobel. Non-human capacity utilization has risen for three straight months. On the need for more Canadian econobloggers.

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.

Will the Small Banks Be Happy Now?
October 16, 2009

Like a lot of other bloggers, I've puzzled over why small banks are opposed to the proposed consumer financial products regulator, which could in principle given them an edge over megabanks. But they clearly have their concerns, and they don't appear to be softening on them, which made me wonder a few weeks back if we shouldn't just exempt them from the new consumer reg.'s and be done with the problem. Well, it looks like the House Financial Services Committee did precisely that yesterday: Democrats showed a willingness to change parts of the financial-overhaul package to make it more palatabl

Worth Reading
October 15, 2009

Shariah compliant Islamic banks fared relatively well during the crisis. Despite Felix Salmon's protests, Thomson Reuters still buys Breakingviews. Nate Silver defends Rush Limbaugh. Covered bonds grow in popularity in Europe. Is the ECB embracing core inflation as the key inflation metric? And is the sequel to Freakonomics "error-riddled" on climate change?

More on Meritocrats v. Establishment on Wall St.
October 15, 2009

Matt Yglesias highlights some evidence that, contra my item from yesterday, the changes on Wall St. during the last generation aren't just cultural and sociological; the amount of brainpower on Wall St. has increased fairly dramatically. I don't doubt this is the case. My point is just that the cultural change is as important as the intellectual change, if not more, in creating our dodgy financial system. That is, the problem isn't smart people per se.

M&A … and Bruce
October 15, 2009

It's safe to say there are not too many investment banking chieftains whose idea of a compliment was to tell you after a meeting that "you showed a certain amount of fingerspitzengefuhl in there." To which the appropriate response was, "Only a certain amount?" Followed by the inevitable rejoinder: "But were you effective?" Bruce Wasserstein, who died this week at 61, loved complexity and was a genuinely complex man himself. Like many of his former colleagues, clients, and competitors, I'll be trying to figure him out for years.

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