On Thursday, Ben Bernanke will appear before the Senate Banking Committee, to begin his reconfirmation process as chairman of the Federal Reserve Board. Based on committee members’ public statements, Bernanke already appears to have enough votes on his side. But Thursday’s hearing and the subsequent floor debate are an important opportunity for senators to raise … Continue reading Some Questions For Mr. Bernanke
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In some influential circles, these questions are now asked: What’s wrong with high levels of inequality in general, and with having very rich bankers in particular. After all, human societies have survived the presence of extremely wealthy individuals in the past – in fact, some now argue, the presence of such a “new aristocracy” can finance … Continue reading Feudal Lords Of Finance
As everyone knows by now, Neil Barofsky, special inspector general for TARP, has a new report out on the decision by the Federal Reserve Bank of New York last Fall to make various AIG counterparties (primarily some very big banks with names you know) whole on the the CDS protection they had bought from AIG … Continue reading The AIG-Maiden Lane III Controversy
Testimony submitted to the Congressional Oversight Panel, hearing on “The overall impact of the Troubled Asset Relief Program (TARP) on the health of the financial system and the general U.S. economy,” Thursday, November 19, 2009. (pdf version) Submitted by Simon Johnson, Ronald Kurtz Professor of Entrepreneurship, MIT Sloan School of Management; Senior Fellow, Peterson Institute … Continue reading Written Testimony Submitted To The Congressional Oversight Panel
Last week, Charles Calomiris wrote an op-ed in the Wall Street Journal arguing that big banks are better for various reasons. Simon wrote last week saying that Calomiris underestimated the political dimension, and that his proposed solution — a cross-border resolution mechanism for large institutions — is the policy equivalent of assuming a can opener. … Continue reading Are Big Banks Better?
The US increasingly displays characteristics that we have seen many times in middle-income “emerging markets” – new dimensions of vast inequality, forms of financial instability that benefit the best connected, and consistently easy credit for the privileged. But this raises the question: who exactly is going to dominate our economic and political landscape moving forward? … Continue reading Who is Carlos Slim?
Over the past 30 years Wall Street captured the thinking of official Washington, persuading policymakers on both sides of the aisle not to regulate (derivatives), to deregulate (Gramm-Leach-Bliley), not enforce existing safety and soundness regulations (VaR), and to stand idly by while millions of consumers were misled into life-ruining financial decisions (Alan Greenspan). This was pervasive … Continue reading Too Politically Connected To Fail In Any Crisis
Early in the First World War, British generals decided to attack German trenches with an initial light bombardment, followed by infantry walking in close order across No Man’s Land. The result was tens of thousands killed in a series of military disasters, but the generals reacted with only small adjustments to their approach and essentially … Continue reading Economic Donkeys
In a memo to Congress on Tuesday, Larry Summers – the head of the White House National Economic Council – laid out his view of where we are and what is likely to happen next in our economic recovery. His tone was more upbeat than we’ve heard in recent utterances, although he has been heading … Continue reading Larry Summers, Economic Recovery, And Ben Bernanke
Policymakers like to make particular kinds of statements at a “low attention” moment, e.g., right before a holiday weekend. This gets items onto the public record but ensures they do not get too much attention. And if you are asked about these substantive issues down the road, you can always say, “we told you this already, so it’s not now news” – … Continue reading The Fed Makes A Bid
There is nothing you can teach Wall Street titans regarding the timing of news flow. Stephen Friedman, the former head of Goldman Sachs, resigned last night as chair of the New York Fed’s board, after committing essentially a rookie error. In December/January, he traded the stock of a company (Goldman) overseen by the NY Fed, while … Continue reading The Other Stress Test (For Bankers)
The bank stress tests are beginning to create a perception problem, but not – as you might think – for banks. Rather the issue is top level Administration officials’ own optics (spin jargon for how we think about our rulers). At one level, the government’s approach to banks – delay doing anything until the economy … Continue reading All About Optics (Predicting Stress Test Outcomes)
France in the 1960s and 1970s was the source of a tremendous amount of new philosophical, literary, and critical thinking – Foucault, Derrida, Lévi-Strauss, Baudrillard, Barthes, etc. But in my opinion, the most important member of that intellectual generation was the sociologist Pierre Bourdieu. In Distinction, Bourdieu’s best-known work, he described how economic class is … Continue reading Pierre Bourdieu, Tim Geithner, and Cultural Capital
Well, it’s done. AIG is getting another bailout. I have to admit I don’t fully understand the ongoing AIG bailout saga, so I thought I would do a little research to try to figure out what is going on. I thought I would just look up all the term sheets, but I found it’s harder … Continue reading AIG in Review