July 12, 2009 - July 18, 2009 Archives
Jul 17 2009, 4:55PM
Say On Pay
In an effort to decrease executive compensation levels, the Obama administration today provided Congress a bill encouraging shareholders to be more involved in determining compensation. The so-called "say on pay" legislation has three concerns: executive pay, golden parachutes and compensation committee independence. It's a nice political move, but I don't think it will amount to much else.
Jul 17 2009, 4:25PM
No Marijuana Legalization In California This Year
Jul 17 2009, 3:30PM
The Justice Department's Interest In Derivatives
Ever since the news hit this week that the Department of Justice (DOJ) is investigating the derivatives market, I've been trying to figure out why. That resulted in my need to better understand the over-the-counter (OTC) derivatives market. Lucky for me, multiple sources came forward to help out. In fact, anyone who does not have intimate knowledge of the derivatives market, but is interested in learning more, would be well-served to read this piece appearing on Atlantic Business yesterday. Through what I've learned this week, I have finally wrapped my mind around what's going on. DOJ is likely concerned with either price control or market share in the OTC derivatives market, or both.
Jul 17 2009, 3:07PM
What Did the American Taxpayer Get for its Billions?
Hard to say. On the one hand, as
What benefit might we get from all these record profits? A more liquid, better capitalized banking system. On the other hand, if the bankers simply ship the profits back out the door as dividends and paychecks, what we'll get is a big fat pile of nothing.
Which will happen? We don't know yet, for all of our dark suspicions. A lot has to do with the regulators--and also with the next few quarters. It wasn't totally surprising that the banks posted substantial profits as the capital markets recovered from total meltdown. Probably things won't look quite so outlandish in the future.
* I was not trying to deny Brad his rightful due; rather, I try not to quote people by name if the conversation wasn't clearly on the record, because sometimes people get upset. Now that he has outed himself, I gladly attribute it to its wise source.
Jul 17 2009, 2:41PM
Looking for a Job? Go to D.C.
Jul 17 2009, 1:54PM
The Most Important Health Care Story Of The Past 24 Hours Is...
(B) The Congressional Budget Office director dares to speak truth to power: none of the major health care bills will reduce costs in the short term and will add to the deficit in the near term.
I was going to pick (B), until I read (C) -- the subhead to a story about how Massachusetts is on the verge of abandoning the fee for service system -- the blood vessels, if you will, of modern American health care.
The subhead is this: "Hospitals and doctors may be put on budget." This change, which was recommended by a commission of stakeholders including doctors and hospitals, is exactly the type of "delivery" reform that health economists are always touting. In essence, every insured person would receive an adjusted share of a predetermined amount of money that insurers and government programs will use to pay for their health expenses for a year. As the Boston Globe notes, "[p]roviders would have to work within a predetermined budget, forcing them to better coordinate patients' care, which could improve quality and reduce costs." There are many details to work out, and the devil lurks: the "shares" must be adjusted for socioeconomic status, different types of treatments, chronic conditions and other factors. Doctors can't see their income disappear or dry up suddenly, or else the reforms would be untenable. The public can't perceive the new scheme as a form of rationing, although health care reform is inevitably a form of rationing. Under the state's universal health insurance scheme, which looks a bit like what Democrats are proposing for the country, everyone (sans certain categories of non-citizen immigrants) is required to hold or purchase health insurance, either through their employer or through a "connecter"-like exchange system. Costs have increased fairly dramatically, as was predicted. By shifting to a system where outcomes determine payment more than services rendered, it might be possible to contain costs -- or at least to manage their growth.
Jul 17 2009, 1:53PM
California, Nevada Match All-Time Unemployment Highs
And how about the national axis of gloom that is MichiCaliFliArivada (that is, MI, CA, FL, AZ and NV)? They claim three of the top six worst unemployment rates.
Jul 17 2009, 1:05PM
What Bank of America and Citi's Profits Mean for Wall St
Jul 17 2009, 12:20PM
The Decline Of Gotham
One of the few locations that seemed to be resilient in the face of the housing crash a year ago was Manhattan. Sure, there had been some layoffs, but the mood was to stay the course and everything would be okay. An article from Bloomberg today reports that things aren't going so well there anymore. Storefront vacancies are climbing and rents dwindling. It seems that the city that never sleeps is getting drowsy.
Jul 17 2009, 11:48AM
The Dark Side of Leverage
It was bizarre sort of pop quiz; he had come out of private equity, while I had been building servers for the last four years. I floundered.
Jul 17 2009, 11:35AM
Information May Want to be Free. But Not Journalism.
Jul 17 2009, 10:59AM
What Does "Too Big to Fail" Mean Anymore?
As a result, we've avoided government nationalization at the expense of basically allowing JP Morgan and Bank of America to nationalize the banks for us.
Jul 17 2009, 10:52AM
Is the ACU "Pay-to-Play" Racket Real?
Jul 17 2009, 10:25AM
Senators Outraged About Foreclosures
Yesterday, the Senate Banking Committee held a hearing to address the ongoing foreclosure problem. Both sides of the aisle tore into representatives from banks, servicers and the Obama administration. Leading the charge, Chairman Dodd (D-CT) asked:
So I'm hoping that, with stakes this high, somebody can explain to me why nothing has changed over the last two years.
Let me give it a shot.
Jul 16 2009, 4:35PM
Lies, Intimidation and Bank of America
Jul 16 2009, 4:05PM
Teaching Pays In South Korea
I stumbled upon a fascinating video news clip over at Reuters today. Unlike in the U.S., educators in South Korea can make incredibly good money. How good? Reuters reports that some make as much as $4 million per year. One tutor it features commands a salary higher than almost all baseball players in the country. South Korean parents are willing to pay more for tutors, due to a cultural emphasis on education that the U.S. lacks.
Jul 16 2009, 3:21PM
The Economics of Blogging
Jul 16 2009, 2:43PM
Clinton Economist: Recovery Will Be Slow
Jul 16 2009, 2:40PM
Is the Apple iTunes-iPod-iPhone Trio a Monopoly?
What monopoly, you may ask, and indeed, I did. Apple has a monopoly over these things only in the trivial sense that P&G has a monopoly over Charmin, and I have a monopoly over the chocolate cake I baked last night.
Jul 16 2009, 2:15PM
Servicers Struggle, And So Do Modified Mortgages
Several weeks ago, I wrote about the difficulty servicers are having keeping up with modifying all of the troubled mortgages out there. Today, the Wall Street Journal has a pretty nice piece about that ongoing saga. I think there are two big takeaways: servicers continue to struggle, and so do the homeowners that got those modifications.
Jul 16 2009, 1:27PM
The Miserable State of MichiCaliFlArivada
For example: Today's foreclosure rate survey is out, and - surprise!- the top four states are all in that Unfab Five.
Jul 16 2009, 1:00PM
How to Understand The Derivatives Market
In 2006, few people outside of the derivatives market had used the word "credit default swap" in casual conversation. By 2008, it had become an inescapable household term. People continue to throw around buzz words gleaned from the pink pages of the FT, but as my colleague, Daniel Indiviglio recently asked: Does anyone out there really understand what the Over-The-Counter (OTC) Derivatives market is? Since I consider myself the resident derivatives wonk at Atlantic Business, I felt compelled to respond. But rather than focus on any particular instrument or issue, I thought it would be best to focus on the overall structure of the market - who the people in the market are, what they do, and what relationships they have to each other - and leave the banker-bashing to somebody else.
Jul 16 2009, 12:30PM
California's Strategy: Be More Like Texas
Jul 16 2009, 12:29PM
On Income and Consumption Inequality
Will Wilkinson has a new paper out on inequality, which I will be blogging about later. But Ezra Klein has an interesting response, which focuses on the difference between income inequality and consumption inequality.
I broadly agree with Will that consumption inequality, not income inequality, is what matters. If the rich have access to broad classes of goods that the poor can't have, I find this worrying. On the other hand, if the problem is that Bill Gates has a really awesome 80 inch flat panel television, while the poor have to be content with a 32 inch CRT, well, I can't say my heartstrings are plucked very tight by this injustice. So it's important to know what the real differences are.
Jul 16 2009, 11:30AM
Can California Smoke Its Way To Prosperity?
Remember in school when you learned that drugs won't solve all your problems? California must have been under the bleachers that day, smoking some hash. Lawmakers there have introduced a bill that would generate nearly $1.4 billion in revenue by taxing and regulating marijuana in California. Here are some details, via the Associated Press:
Jul 16 2009, 11:08AM
CIT RIP
Jul 16 2009, 11:00AM
This Recovery Will Be Very, Very Painful
David Leonhardt, writing in the New York Times, paints a picture of US employment in dark, morbid colors, and makes the argument that even if the recession is over, we're a long way from a recovery that feels like a recovery. We might be moving into the epilogue of recession otherwise known as the slog, but this is why you shouldn't expect
Jul 16 2009, 10:30AM
No Bailout For CIT
Last night, I read that the Obama administration has refused to rescue CIT Group, a commercial lender. I'm fascinated by the decision. After bailing out the banks, credit card companies, insurance companies, auto companies and homeowners, what makes CIT unworthy? The Associated Press says:
By withholding aid, the administration is betting that CIT's likely failure won't pose a critical risk to an economy weighed down by rising unemployment.
That's right. Good bet or bad bet?
Jul 16 2009, 9:00AM
Suing The Rating Agencies
Some news hit late yesterday that the California Public Employees' Retirement System (Calpers) is suing the rating agencies for $1 billion for incorrectly rating structured investment vehicles (SIVs). A while back, I mentioned the possibility of suing the rating agencies for negligence. It looks like that's essentially what Calpers is doing. I wanted to break down a few of its arguments, as found in an article at CNN/Fortune, to see how they hold up.
Jul 15 2009, 5:40PM
America's Newest Social Security Crisis
Jul 15 2009, 4:45PM
Can Wal-Mart Save The Planet?
First, Wal-mart got on board with healthcare reform. Now the New York Times reports that it seeks to push environmentally sustainable products. At this rate, Wal-Mart might be in danger of becoming the sweetheart of progressives, instead of being a constant target of their criticism.
According to the Times, tomorrow Wal-Mart will announce a new indexing system to help consumers understand the environmental impact of everything they buy. I believe providing consumers additional information to evaluate which products to purchase is a laudable goal. I just have a few questions/concerns about how it will turn out.
Jul 15 2009, 4:11PM
More Thoughts on the Health Care Surtax
Jul 15 2009, 3:29PM
How Do We Solve Obesity?
Jul 15 2009, 3:06PM
Taxes for the Rich, Health Care for the Rest
How does this bill do that? It promises Medicare/Medicaid savings and forces almost all employers to cover their workers. But most importantly, it taxes the rich.
Jul 15 2009, 3:00PM
Are Better-Than-Expected Earnings Green Shoots?
I hate the green shoots metaphor, but I'll use it anyway. And I worry that we'll start hearing it a lot again: earnings season is underway on Wall Street and quarterly numbers are largely looking better than expected. Should we pop the champagne? I wouldn't yet.
Jul 15 2009, 1:37PM
In Recession, Hawaii to Build a "Spaceport"
Jul 15 2009, 1:00PM
This Recession is Over
Jul 15 2009, 12:30PM
Wanted: Someone Who Understands The Derivatives Market
Yesterday, the news hit that the Department of Justice is investigating Markit, the major provider of derivatives data, pricing information and indices. That news failed to explain why the DOJ was so interested in Markit, though speculation pointed at antitrust. Today, the Wall Street Journal reports that hunch was right. In trying to understand how large banks, through Markit, might be manipulating derivatives pricing, I realized something: I don't understand how the derivatives market works. And neither did anybody else I asked.
Jul 15 2009, 12:00PM
Renting Instead of Foreclosing
Yesterday, I explained some reasons why a mortgage payment deferral plan for unemployed homeowners troubled me. Reuters reports yet another plan being considered by the Obama administration. This plan would have distressed homeowners rent their houses, rather than foreclose. As the administration continues throwing ideas at the wall, will this one stick? I doubt it.
Jul 15 2009, 11:34AM
Investigating the Financial Crisis
Washington is buzzing because leadership on Capitol Hill could name as soon as Wednesday the 10 members of the Financial Crisis Inquiry Commission.Am I the only person who has not heard of this?
Jul 15 2009, 10:30AM
Should We Kill the Stimulus?
Jul 14 2009, 4:20PM
A Future For Work-Life Balance
Most people who have worked in corporate America are probably very familiar with the term work-life balance. Probably only a fraction of those people have actually experienced it. The Wall Street Journal today reports that former General Electric CEO, and all-around business guru, Jack Welch thinks work-life balance is a fiction -- if you want to be at the top of your game. I think Welch is right for his generation, but as technology continues to advance, so should work-life balance.
Jul 14 2009, 3:55PM
Republicanism and Its Discontents
Jul 14 2009, 3:15PM
Take That Google Apps: Free Microsoft Office Online
In May, Microsoft struck at Google's search empire with Bing, a good-looking and smart-acting new search engine that the Times' David Pogue (and I) called better than Google, barely. Google struck back this week with Google Chrome, a planned operating system built for the growing netbook world of internet-based computing. And now Microsoft's counterstrike: the software giant will offer a free online version of its Office product (ie Word, Excel, PowerPoint) in 2010. Free Microsoft Office! And this guy said the Microsoft-Google wars were bad for customers...
Jul 14 2009, 2:15PM
Is CEO Health Public Information?
Matthew Lynn, a Bloomberg columnist, doesn't think so. He argues in an op-ed that a chief executive's health -- no matter how important that executive is to the firm -- is personal, not public, information. Of course, he uses Apple CEO Steve Jobs as his prototypical example. I generally agree, but I think the SEC still needs to monitor important CEO health news on some level.
Jul 14 2009, 1:30PM
Where to Get a Job in Tomorrow's Economy
Jul 14 2009, 1:00PM
New Unemployment Benefit: Mortgage Payment Deferral?
According to Reuters, President Obama is considering ways to allow unemployed homeowners to skip or defer payments while they struggle to find new jobs. This would be the latest of the administration's ever-evolving efforts to prevent foreclosures and ease the housing market into a bottom. This attempt, however, would have some serious problems.
Jul 14 2009, 12:25PM
Organ Donation and the Gift of Life
Jul 14 2009, 11:50AM
Why Antibiotics Regulation Is Good for Us
But Megan, you will say, government regulation! Nanny state! Ecofreaks!
Jul 14 2009, 11:28AM
Goldman Sachs' Fabulous Quarter
Still, the populists are bound to make hay out of this, and it's hard to blame them.
Jul 14 2009, 11:10AM
Sarah Palin's Cap-and-Trade Takedown
Let's think about this for a second.
Jul 14 2009, 11:00AM
Financial Suckers Making Financial Policy
So should we be worried that Alan Grayson of the House Financial Services Committee, got taken in by a ponzi scheme? Does this render him unfit for the position, as I've seen some conservative commentators claim?
Jul 14 2009, 10:45AM
Obama Touts Community College
Today, President Obama is set to unveil a plan to provide $12 billion to community colleges. Given the emphasis on the President's other priorities like health care and cap and trade, education has received little press coverage thus far. Although some might debate whether the federal government ought to continue to ramp up its spending, if it's determined to do so, I think it's hard to argue against an initiative like this.
Jul 14 2009, 10:11AM
June's Retail Rise: Good News or Bad News?
Jul 14 2009, 9:00AM
Everyone Under The TARP!
I somehow missed this article from Forbes over the weekend. Apparently, with the banks stabilized, the Treasury is considering handing out some of the remaining $700 billion in the "TARP" bailout funds to bail out small businesses. Forbes reports:
Under the proposal, the administration would use money from the Trouble Asset Relief Program, or TARP, to expand a Small Business Administration program for small-business loans.
Jul 13 2009, 4:55PM
And You Thought Detroit Had Issues
Le populist rage from the Financial Times: "Workers at a failed French car parts supplier are threatening to
blow up their factory unless the company's two biggest clients - Renault and PSA Peugeot Citroen - stump up extra compensation." And just in time for Bastille Day!
This comes after a wave of "bossnappings" across the country, where frustrated workers would take their bosses hostage "sometimes for several days."
Jul 13 2009, 4:50PM
Villains of the Piece
A woman gets into her car, and waves at her husband, who is crossing in front of the car. Pressing the pedal to the ground, she puts it into gear . . . and steams forward at full speed, crushing him against the wall of the garage.
Is she a villain? It rather depends, doesn't it?
Jul 13 2009, 4:20PM
Can Catholics Be Capitalists?
Last week I heard about the Pope's new writing Caritas In Veritate. For those whose Latin is rusty, that translates to "Charity In Truth." Most news I read indicated that the Pope was finally taking a stand regarding the financial crisis, condemning the capitalist swine who created it. That's not exactly true.
Jul 13 2009, 3:52PM
Innovations, Pets, and Health Care Reform
President Obama talks about the importance of prevention in a way that suggests that when people have heart attacks it's their own fault. But my wife, a longtime vegetarian and marathon runner, had a freak heart attack at the age of 37.
Jul 13 2009, 3:03PM
Why Aren't Kids These Days Downloading Music?
But a new report suggests that illegal music downloading has fallen off more than 60 percent in the last two years, as teens are increasingly turning to streaming sites, such as YouTube, Pandora, Grooveshark and others. As they leave file-sharing behind, is this good news for the music industry?
Jul 13 2009, 2:20PM
BusinessWeek's Sale and the Future of the Newsweekly
Jul 13 2009, 1:50PM
Fixing California Through. . . Higher Taxes On Business?
The Los Angles Times today has a headline that declares: "It's time to close a big tax loophole for businesses." That tax "loophole" refers to corporations abusing a tax law created by Proposition 13 in 1978. It prohibits reassessment of property for real estate tax purposes, except at the time of sale. The article claims that businesses have been dodging their real estate taxes by stretching the intent of the law, and that needs to be fixed as soon as possible. I can only ask: really?
Jul 13 2009, 1:08PM
Shadow Banking: What It Is, How it Broke, and How to Fix It
We hear a lot of chatter about the shadow banking system and its crucial role in the financial crisis. But rarely do we find time to step back and ask the basic questions: What is shadow banking, where did it come from, how did it operate, what role did it play in this crisis and how do we deal with it going forward?
I hope this Q&A with a very smart professor and economist at Barnard College Professor Perry Mehrling provides answers to each of those questions.
Jul 13 2009, 11:20AM
Blogging Honestly
Jul 13 2009, 11:00AM
Are Kindles and iPods the End of Culture Snobbery?
This is what you call culture snobbery, and as James Wolcott explains -- in Vanity Fair, no less -- it is dying a slow, digitized death. Because when all culture can be reduced to a file living in our e-reader and iPod, will we ever be able to judge strangers by the covers of their reading material again?
Jul 13 2009, 9:45AM
The Recovery Will Be Fast
1. Cutbacks in employment (and, I would add, hours worked) are sharp relative to the cutbacks in output.
In addition, I would point out that:
Jul 13 2009, 9:00AM
Antitrust Activism Is Good
The antitrust division of the Department of Justice is busy these days, and the Wall Street Journal doesn't like it. It opines reports:
As if investors needed more to worry about. The outlook for corporate profits already is clouded by an uncertain economy, and markets remain skittish. Now there is a burst of antitrust activism.
But how much should investors worry? Markets often shrug off antitrust action, partly because it is hard to quantify potential damage.
Not exactly.
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