Economy

Judge Rakoff's Rejection of the SEC-Bank of America Settlement
September 15, 2009

Bank of America and the SEC were blasted on Monday in a ruling issued by a Federal District Judge. The two parties had proposed a settlement deal over bonuses that had been paid to Merrill Lynch last year. The judge, Jed Rakoff, not only rejected it; he criticized the ethics of the proposal: "the proposed Consent Judgement is neither fair, nor reasonable, nor adequate. It is not fair, first and foremost, because it does not comport with the most elementary notions of justice and morality," The entire (shockingly bold) ruling has been posted below.

Obama and the Ghost of Louis Brandeis
September 15, 2009

President Obama’s speech yesterday was disappointing. As a diagnosis of the problems that let us into financial crisis, it was his clearest and best effort so far. He didn’t say it was a rare accident for which no one is to blame; rather he placed the blame squarely on the structure, incentives, and actions of Wall Street. But then he said: Our regulatory reforms will fix that. This is hard to believe. And even the president seems to have his doubts, because he added a plea that--in the meantime--the financial sector should behave better. The audience was composed of our financial elite, but

Two Cheers for Obama's Wall St. Speech
September 15, 2009

A couple quick points about Obama’s Wall Street reform speech yesterday: 1.) While you never know how the politics are going to play out until the legislative fight gets going, it looks like the administration has a pretty good handle on where the major PR battle will be and is preparing accordingly (unlike, say, health care and death panels). That’s the consumer financial products regulator, of course.

Goolsbee's Subtle Stimulus Point
September 15, 2009

White House economist Austan Goolsbee made a great point about the stimulus yesterday at our financial crisis conference in Washington. I don’t have a transcript yet, but the gist was: One reason it’s wrong to dwell on the fraction of stimulus money that’s been distributed so far is that it misunderstands the difference between obligation of money for a project and actual payment for the project.

Peking Over Our Shoulder
September 15, 2009

Our Chinese shareholders get nosy.

Better Regulate Than Never
September 15, 2009

The national ideological tilt has shifted fast, away from libertarianism and toward broad support for interventions like the new federal "pay czar," who will oversee banker compensation for bailout recipients. Such a sudden and dramatic reversal suggests that ideology has not been moored to steady principles. Instead, we have grasped too quickly at ephemeral data points and permitted our worldview to be shaped by panic. In this haze of hyperbole, we have an obligation to discern the more modulated truth.

What You Need to Know About the State of Our Financial System
September 14, 2009

Financial markets have stabilized--people believe that the U.S. and West European governments will not allow big financial institutions to fail. We have effectively nationalized any banking system losses, but we’ll let bank executives enjoy the full benefits of the upside. How much shareholders participate remains to be seen; there will be no effective reining in of insider compensation (my version; Joe Nocera’s view). Small and medium-sized banks, however, will continue to fail as problems in commercial real estate continue to mount.

Slideshow: The Day Lehman Died
September 14, 2009

A year ago on September 15, 2008, the financial crisis took a drastic negative turn. The Lehman Brothers investment firm declared bankruptcy, causing a 1,000-point slide in the Dow and triggering a cascade of bank losses that threatened to topple the entire financial system. Click through this slideshow to see scenes from the crash.

Worth Reading
September 14, 2009

Philly public library system on the brink of closure. John Cochrane responds to Krugman, who fires back. David Warsh: "On the evidence so far, it is Robert Lucas, not Paul Krugman, who has been more nearly correct." How Glenn Beck betrays conservatives by attacking Cass Sunstein.  Only 25% of economists say employers should provide health insurance for full-time workers. Intrade odds for health plan passage in '09 are falling. Delinquencies on securities tied to commercial real estate are ratcheting up.    

Why Are Currency Traders Now Borrowing Dollars?
September 14, 2009

For years the term "carry trade" was synonymous with the Japanese yen. Because of the country's zero-interest rate policy, traders borrowed yen on the cheap and purchased higher yielding assets in other countries and markets, pocketing the difference. But in recent weeks, a key borrowing rate for the dollar -- the 3-month Dollar Libor -- has fallen below the 3-month Yen Libor. That means the dollar has added "carry trade currency" to its other titles: safe haven and world's reserve currency.

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