The Wall Street Journal has an excellent report detailing the financial industry's sharp turn away from the Democrats and toward the Republicans, in response to the Obama administration's plans to regulate them and tax them at higher rates: Managers of hedge funds—private investment partnerships that cater to institutions and wealthy people—are reacting to what some criticize as Mr. Obama's populist attacks on Wall Street, as well as to Democrat-led efforts to raise their tax bills.
All of those headlines about record corporate profits turn out to be a little misleading. As Justin Fox notes at the Harvard Business Review, corporate profits are hitting all-time highs only if you look at nominal dollars.
There were many factors that led us to the financial crisis of 2008—dangerous derivatives, irresponsible ratings agencies, negligent regulators—but one was more important than the rest. We now know it as the “too big to fail” problem. What brought the economy to the edge of disaster wasn’t only that financial institutions had made rash bets on lousy investments, but that those institutions were so massive that when their bets went bad, they threatened to take the rest of the economy down with them.
The financial crisis in America isn't over. It's ongoing, it remains unresolved, and it stands in the way of full economic recovery. The cause, at the deepest level, was a breakdown in the rule of law. And it follows that the first step toward prosperity is to restore the rule of law in the financial sector. First, there was a stand-down of the financial police. The legal framework for this was laid with the repeal of Glass-Steagall in 1999 and the Commodities Futures Modernization Act of 2000.
Have we finally fixed the 'too big to fail' problem?
Modern quantitative finance presents unique opportunities for smart people to run amok. But we have not fixed our financial system, or reined in the h
That’s the question at the heart of Issue 1, on the ballot today in Ohio. If Issue 1 succeeds, Ohio’s fantastically successful Third Frontier program will receive an infusion of about $700 million over the next four years. If not, the Third Frontier will run out of funding in two years, and Ohio will lose a powerful tool for spurring innovation and reaping the benefits. Although most Ohioans haven’t heard of it, Third Frontier is a significant job engine for the state. An independent analysis found that the state’s $681 million expenditure so far has yielded $6.6 billion in economic activity,
Cato's Arnold Kling has a thought-provoking article in National Review arguing for breaking up the large banks: It is the political economy that most concerns me. Freddie Mac and Fannie Mae represent everything that is wrong with the politics of big banks. They acquired lobbying prowess, their decisions were distorted by political concerns, and they were bailed out at taxpayer expense. All of these developments seem to be inevitable with large financial institutions, and all are deeply troubling to those who value economic freedom.
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.