Dr. Manhattan
Dr. Manhattan is the pseudonym of a lawyer in New York City who represents, among others, clients in the investment management industry. He started blogging in early 2002, when the entire NYC-based blogosphere could gather in one room (which they often did). In between his frequent retirements, he blogged about politics, baseball, Israel and autism (especially vaccine-related matters) at blissfulknowledge.com. With the regulatory system up for grabs, for this project he has decided to try the novel approach of blogging about matters which bear some relationship to the topics that come up in his day job (within the strict limits of professional obligations, of course). In case anyone was wondering, none of his opinions expressed on this blog are necessarily those of his clients, employer or colleagues.
Recently by Dr. Manhattan
Jun 15 2009, 8:42PM
How Executive Compensation is Like the Weather
There are reasons everyone talks about executive compensation, but nobody does anything about it.
Regarding the latest Obama administration initiative regarding compensation on Wall Street generally, Matthew Yglesias agrees with those who accuse the administration of not doing enough and approvingly cites a Brad DeLong post unfavorably contrasting Wall Street compensation schema to those of Silicon Valley ventures:
Jun 15 2009, 10:59AM
Sentences That Don't Compute
Today's entry comes from Mark Thoma, who writes in a guest-blog at the Washington Post:
The development of the shadow banking system is important because the troubles we are seeing today are not the result of problems in the traditional, regulated sector of the financial industry. The problems began in the unregulated shadow banking system.
(Emphases added.)
Which entities' failures and near-failures required TARP and other system-saving emergency programs again?
May 22 2009, 10:30AM
Rating Agency Follies: Conspiracy Theory Edition
Will the US' debt-rating be downgraded from its current AAA-rating? And will it matter if it is?
May 22 2009, 1:47AM
Convenient Fictions About AIG
Mar 12 2009, 10:10AM
Choose your own punchline
Earlier this morning, Amity Shlaes was interviewed on Bloomberg Radio's "Surveillance" program. And she broke some exclusive news: apparently her controversial Depression book "The Forgotten Man" will be coming out in a 120-page illustrated format, aimed at the teenaged/student market.
As my namesake would say: It's two years from now, and a Watchmen-style adaptation is available on DVD...
Best of all, Shlaes described the upcoming format as a "cartoon" version of the book. Something tells me Jonathan Chait will agree.
Mar 5 2009, 7:58PM
There's leverage everywhere!
"[A] central lesson of this depression will be how many different ways there are to leverage."
Megan argued yesterday in favor of banks returning to their roots as privately held partnerships:
Feb 15 2009, 1:49PM
The least surprising business news of the day
Take it away, WSJ:
General Motors Corp., nearing a federally imposed deadline to present a restructuring plan, will offer the government two costly alternatives: commit billions more in bailout money to fund the company's operations, or provide financial backing as part of a bankruptcy filing, said people familiar with GM's thinking.
(Hat tip to Business Insider.)
As co-contributor Jim Manzi pointed out at the time, GM barely pretended to have a viable business plan in connection with the initial bailout talks late last year. And those who remain convinced that GM has already taken the steps it needs to return to viability (such as Jonathan Cohn) should read this Fortune piece by Alex Taylor, who has covered the auto industry for over 30 years and, by his own admission, fallen for GM's promises of turnaround far too often over that span.
Feb 6 2009, 8:20AM
None dare call it regulation
Matt Yglesias recently wrote:
Oftentimes regulatory schemes are nothing but outdated ways of maintaining the dominant market position of incumbent operators or other privileged stakeholders.
Exactly! And in these times where "regulation" is an all-purpose buzzword, it is worth remembering that the "incumbent operators" and/or "priviliged stakeholders" can be regulators themselves. (Matt clearly knows this already.)
Feb 5 2009, 8:00PM
Further proof of God's existence (Madoff edition)
When it comes to drawing faith and solace from the headlines, I had thought nothing could top the news that Eliot Spitzer had lost money through Madoff.
But with the recent release of the complete list of Madoff's direct victims by the bankruptcy court, that news has some serious competition:
Feb 5 2009, 2:31PM
How the SEC missed Madoff
In honor of Harry Markopolos' testimony to the SEC about his heroic efforts to alert the SEC to Bernard Madoff's Ponzi scheme, it is worth revisiting his now-famous 2005 report to the SEC and what we can learn from it about the SEC and its failures.
I recently had the good fortune to be introduced to a senior attorney in the SEC's enforcement division. Unfortunately, I wasn't quick or brave enough to ask the only question everyone has wanted the SEC to answer from the moment the Madoff scandal: "How in the world did you miss this?" Especially in light of Markopolos' efforts, there is only one answer:
Feb 3 2009, 1:01PM
The most important banking news of the day
The WSJ reports that under political and financial pressure, Citigroup is exploring its options for getting out of its stadium naming deal with the Mets.
In a statement Monday, Citigroup said that "no TARP capital will be used" for the stadium -- referring to government funds from the Troubled Asset Relief Program. But as it revisits the pact, Citigroup is essentially acknowledging that the volatile political climate could make it untenable for the bank to proceed with the deal.
The Mets deal was attacked last week as an example of misplaced spending by financial institutions that needed bailout funds. Reps. Dennis Kucinich (D., Ohio) and Ted Poe (R., Texas) wrote to Treasury Secretary Timothy Geithner on Wednesday, asking him to push Citigroup to dissolve the Mets deal.
First, they came for the private jet, then they came for the bonuses, and now they're coming for the stadium naming rights deal...what's a bank to do nowadays?
Feb 1 2009, 4:39PM
Autism, vaccines and public choice
Kevin Drum points us to the news that Alison Singer, the former spokeswoman for Autism Speaks, has resigned her post over the organization's continued support for research into the discredited autism-vaccine connection:
In general, I disagree with a policy that says, "Despite what this study shows, more studies should be done." At some point, you have to say, "This question has been asked and answered and it's time to move on." We need to be able to say, "Yes, we are now satisfied that the earth is round."
Jan 29 2009, 1:17PM
Rating agency follies: money market funds edition
The ratings agencies have an enormous amount of power: pension funds and insurance companies invest according to their rules; under Basel II, bank capital ratios are substantially determined by how the agencies rate their portfolios of loans; and, of course, the entire "shadow banking system" created by providers of super-senior credit protection (monoline insurers, bank-sponsored asset-backed conduits, AIG Financial Products, etc) was only possible because of the ratings agencies. By 2006, the entire financial system was extraordinarily leveraged to the opinions of these government-blessed non-governmental independent agencies...
Jan 26 2009, 9:52PM
None so blind....
Henry Blodget had a recent cover story for this magazine about why financial disasters, like the poor, will always be with us. In similar vein, this excerpt from n+1's "Interview with a Hedge Fund Manager" from January 2008 provides a very good example of how, in practice, very smart people set the stage for financial disasters:
Jan 26 2009, 2:40PM
Were investment bank IPOs really the problem?
No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.'s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.'s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.
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