finance

Enhancing Venture Capital to Drive Innovation
February 11, 2010

To create the new jobs needed in our nation, and make sure our world-leading creativity and innovation ends up creating new businesses, we need deeper pools of venture and early stage capital. Nowhere are jobs needed more than in the Midwest manufacturing belt. A recent Brookings Metropolitan Policy Program report authored by Cleveland’s Frank Samuel suggests how we might better link new technology discovery going on in the ‘Rust Belt” to new firm creation. It turns out the industrial heartland reaching from Minneapolis, Milwaukee, and St.

Dismember Goldman Sachs
January 22, 2010

The White House background briefing is that their proposals would freeze biggest bank size “as is”--this makes no sense at all. Twenty years of reckless expansion, a massive crisis, and the most generous bailout in human history are not a recipe for “right” sized banks. There is a lot of work the administration hasn’t done on the details--this is a classic policy scramble, in which ducks have not been lined up.

Is the White House Finally Taking It to the Banks?
January 21, 2010

Paul Volcker, legendary central banker turned radical reformer of our financial system, has won an important round. The WSJ is now reporting: President Barack Obama on Thursday is expected to propose new limits on the size and risk taken by the country’s biggest banks, marking the administration’s latest assault on Wall Street in what could mark a return--at least in spirit--to some of the curbs on finance put in place during the Great Depression. This is an important change of course that, while still far from complete, represents a major victory for Volcker--who has been pushing firmly for e

The Big Banks: Wrong Since Forever
January 18, 2010

Daniel Gross recently wrote an excellent piece for Slate about why we should ignore the banking industry's warnings about the bank tax. Basically, Gross argues that they are probably wrong now because they've always been wrong (at least about the dangers of regulation): This rule dates almost to the beginning of American history. Many commercial banks in the United States opposed the creation of the first and second national banks of the United States in the late 18th and early 19th century.

Pump Up the Volume, Angelides Commission!
January 14, 2010

On the first day of the Financial Crisis Inquiry Commission, Phil Angelides demonstrated a gift for powerful and memorable metaphor: accusing Goldman Sachs of essentially selling defective cars and then taking out insurance on the buyers. Lloyd Blankfein and the other CEOs looked mildly uncomfortable, and this image reinforces the case for a tax on big banks--details to be provided by the president later today. But the question is: How to keep up the pressure and move the debate forward? If we stop with a few verbal slaps on the wrist and a relatively minor new levy, then we have achieved basi

Bank Tax Arrives
January 12, 2010

The Obama administration tipped its hand today--they are planning a new tax of some form on the banking sector. But the details are deliberately left vague--perhaps “not completely decided” would be a better description. The NYT’s Room for Debate is running some reactions and suggestions. The administration is finally getting a small part of its act together--unfortunately too late to make a difference for the current round of bonuses.  We know there is a G20 process underway looking at ways to measure “excess bank profits” and, with American leadership, this could lead towards a more reasonab

It's Time for a Supertax on Big Bank Bonuses
January 11, 2010

The big banks are pre-testing their main messages for bonus season, which starts in earnest next week. Their payouts relative to profits will be “record lows,” their people won’t make as much as in 2007 (except for Goldman), and they will pay a higher proportion of the bonus in stock than usual.  Behind the scenes, leading executives are still arguing out the details of the optics. As they justify their pay packages, the bankers open up a broader relevant question: How much bonus do they deserve in this situation? After all, bonus time is when you decide who made what kind of relative contrib

How Should Goldman Sachs Cover its Ass This Bonus Season?
January 08, 2010

Sources say that Goldman Sachs’s bonuses will be announced on Monday, January 18, and actually paid sometime between February 4 and February 7. In previous years, the bonuses were paid in early January--but the financial year shifted when Goldman became a bank holding company. For critics of the company and its fellow travelers, the timing could not be better. Anxiety levels about the financial sector are on the increase, even on Capitol Hill. The tension between high profits in banking and stress in the rest of the economy becomes increasingly a topic of discussion across the nation. And you

Bernanke Comments on the "Doom Loop." But Does He Get It?
December 22, 2009

Senator David Vitter submitted one of my questions to Federal Reserve Chairman Ben Bernanke, as part of his reconfirmation hearings, and received the following reply in writing (as already published in the WSJ online): Q. Simon Johnson, Massachusetts Institute of Technology and blogger: Andrew Haldane, head of financial stability at the Bank of England, argues that the relationship between the banking system and the government (in the U.K.

Did Those Bank CEOs Deliberately Skip Out on Obama?
December 21, 2009

The fundamental divide in opinion regarding our financial system is: Are the people running "large integrated financial groups" hapless fools, buffeted by forces beyond their comprehension and control; or do they know exactly how to ensure they get the upside and the awful, sickening downside is borne by society--including through high unemployment? Some light was shed on this issue by Monday’s meeting at the White House or, more specifically, by who didn’t turn up and why.

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