finance

Can We Fix Too Big to Fail Without Shrinkage?
October 28, 2009

David Wessel has a column in today’s Wall Street Journal laying out three approaches to solving our Too Big Too Fail (TBTF) problem. The first two amount to different ways of “busting them up,” as Wessel puts it.

The Man Who Killed Glass-Steagall Wants It Back
October 27, 2009

Something sure to get Simon Johnson's heart pumping: Via the Journal's Real Time Economics blog, I see that John Reed, the man who helped deliver the coup de grace to the Depression-era law against combining commercial banking with investment banking and insurance, now wants to bring it back.

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

Financial Innovation We Can Believe In?
October 22, 2009

It's fairly well-established that people could save money over the long run by making their homes more energy-efficient—better insulation, say—or even, in some cases, putting solar panels on their roofs to generate their own electricity. But many of these upgrades never happen, for a variety of reasons. Sometimes the incentives are misaligned, if, say, the landlord owns the building but the tenant pays electricity and heating costs.

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.

TNR Debate: Too Much Transparency? (Part VI)
October 19, 2009

I had hoped my essay, "Against Transparency," might have inspired something of a marriage between the transparency movement and campaign finance reform. To that end, I had offered something old and something new, something borrowed, and, as is my style, something blue. But like high school all over again, I have obviously fumbled on the first date Let's work this backwards. Something blue: Yes of course my piece is "worr[ied]" (Weinberger) and "gloomy" (Miller/Klein), even "dour" (Abrams), as the commentators say. Of course it is.

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.

How the Recession is Accelerating Retirement Plans
October 05, 2009

While the impact of falling stock prices on older workers' retirement decisions has received a lot of attention this downturn, the more important driver of retirement rates appears to be unemployment, according to new research by Courtney Coile and Phillip Levine. (Sorry, pay-version only.) Using 30 years of data on changes in home and stock prices and labor market conditions, they conclude: When the unemployment rate rises, more workers between ages 62 and 69 retire, particularly those with less education.

UPDATED: The Final Five
October 05, 2009

Sometime soon, maybe this week,* the Senate Finance Committee is expected to vote on the health care reform bill it spent the last two weeks debating. Inside and outside the committee, people following this process more closely than I am say the bill is likely to pass. But it's not yet a sure thing. The committee roster is thirteen Democrats, ten Republicans. Majority vote rules. Chairman Max Baucus can afford to lose one Democrat, even if all of the committee Republicans vote against it.

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