Economy

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

Worth Reading
October 22, 2009

Christina Romer on the declining impact of the stimulus. Chart of the Day: State-level ideology splits. Andrew Leonard: Big banks won't be broken up. Why Incentive pay doesn't work at high levels. TED Video: "How the Current Economy Has Affected Dentists, Vasectomies, Guns and Shark Attacks."

The Pay Czar Strikes
October 22, 2009

So it really does sound like Ken Feinberg is on the right track. I like the idea of cutting cash salaries to under $500,000 for top executives and shifting compensation toward long-term stock grants, which the Journal says wouldn't be touch-able for at least four years (with the possible exception of companies that pay back their bailout money early). One question: What happens to the stock if the executive leaves the firm sooner? According to the Journal, Feinberg wants the long-term grants to start this year.

The Consensus on Big Banks is Beginning to Crack
October 21, 2009

Just when our biggest banks thought they were out of the woods and into the money, the official consensus in their favor begins to crack. The Obama administration’s publicly stated view--from the highest level in the White House--remains that the banks cannot or should not be broken up. Their argument is that the big banks can be regulated into permanently low risk behavior. In contrast, in an interview reported in the NYT this morning, Paul Volcker argues that attempts to regulate these banks will fail: “The only viable solution, in the Volcker view, is to break up the giants.

Worth Reading
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.

GM's Ex-CEO: Worse Than You Thought
October 21, 2009

If you've been following the trials of the auto industry this last year, then you already know GM's management team, led by former CEO Rick Wagoner, left a lot to be desired. But, even so, Wagoner comes off as unbelievably lame in Steve Rattner's account of his time as Obama's auto guru. To wit: At GM's Renaissance Center headquarters, the top brass were sequestered on the uppermost floor, behind locked and guarded glass doors.

Were There Really Any Madoff "Winners"?
October 21, 2009

This Wall Street Journal piece says New York Mets owner Fred Wilpon may have been one of them: The filing, by the court-appointed trustee handling claims for Madoff victims, is the first documentation of how deeply invested Mets principal owner Fred Wilpon was with Mr. Madoff, a longtime friend. The filing showed that the Mets Limited Partnership, which is connected with Sterling Equities Inc., owner of the Mets, deposited about $523 million into two accounts with Mr.

Worth Reading
October 20, 2009

Wages in NYC fell over 20% post-crisis. America's upward mobility myth. S.E.C. set to sharply reduce trading in "dark pools." Is the administration overstating the impact of its stimulus dollars? Nobel lessons for economics students. Why do Yahoo email users have the worst credit ratings?

Hank Paulson: Getting Tougher To Defend
October 20, 2009

I've weighed in on Paulson's behalf a couple times these last few months, but, like Felix Salmon, I really have no idea what he was thinking here. It's from Andrew Ross Sorkin's just-released book on the financial crisis: When Paulson learned that Goldman’s board would be in Moscow at the same time as him, he had [Treasury chief of staff] Jim Wilkinson organize a meeting with them. Nothing formal, purely social — for old times’ sake. For fuck’s sake! Wilkinson thought.

TAKE A HIKE
October 20, 2009

If readers of The New Republic’s website will let their eyes stroll down the right side of the page, they’ll discover a blog called “The Avenue.” It’s not the sexiest title, and it’s not about the latest White House rumors, but it’s one of the best running commentaries on how the federal government, and state and local governments are trying, or failing, to rebuild the economy.  I’d point to a comment by Mark Muro and Sarah Rahman on the occasion of the Nobel Prize for Physics about how the corporate labs where breakthrough research was nurtured have largely been shut down. And how the Obama a

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