In a speech yesterday, Fed Chairman Ben Bernanke insisted that low interest rates were not the root cause of the most recent real estate bubble. The New York Times says he used his "strongest language yet" in defending the central bank's past decisions and emphasizing the importance of greater financial regulation moving forward. Bernanke said, "Stronger regulation and supervision aimed at problems with underwriting practices and lenders' risk management would have been a more effective and surgical approach to constraining the housing bubble than a general increase in interest rates." The Wall Street Journal notes that Bernanke's views on how the Fed should handle bubbles have changed. Previously, the paper says, "Its bubble strategy was to mop up after a bubble burst with lower interest rates to prevent damage to the broader economy." Recently, though, "Bernanke said, `never say never,' when asked whether the Fed should instead use higher interest rates to pre-emptively prick future bubbles, and he later said he wouldn't rule it out."
The Pope is considered to be infallible. Apparently, those who hold the title of Federal Reserve chairman want to be viewed that way as well. Fed chair Ben Bernanke defends the decision by his predecessor Alan Greenspan to keep interest rates super low following the 2001 recession, saying that the Fed's monetary policies were not the cause of the housing bubble.
Fed chair Ben Bernanke defends the decision by his predecessor Alan Greenspan to keep interest rates super low following the 2001 recession, saying that the Fed's monetary policies were not the cause of the housing bubble.
Labour and the Conservatives were today locked in the first big squabble of this year's general election campaign as the Tories described claims by the chancellor, Alistair Darling, that they had a £34bn black hole in their spending plans as "a dodgy dossier full of lies".In one of the morning's press conferences that laid out some of the battlegrounds of the long campaign - to culminate in an expected polling day on 6 May - Darling said the Conservatives were trying to fight the election "on a nod and a wink".He issued a 148-page document laying out what he said were Tory weaknesses on spending, with £45bn in spending commitments backed up by only £11bn to pay for them.
Labour and the Conservatives were today locked in the first big squabble of this year's general election campaign as the Tories described claims by the chancellor, Alistair Darling, that they had a £34bn black hole in their spending plans as "a dodgy dossier full of lies".
In one of the morning's press conferences that laid out some of the battlegrounds of the long campaign - to culminate in an expected polling day on 6 May - Darling said the Conservatives were trying to fight the election "on a nod and a wink".
He issued a 148-page document laying out what he said were Tory weaknesses on spending, with £45bn in spending commitments backed up by only £11bn to pay for them.
The move by Pimco, which is based in Newport Beach, California, comes as the majority of strategists in the bond market predict prices for both US and UK government debt to fall this year. Prices are expected to come under pressure as the two nations shoulder larger debt burdens in the wake of the financial crisis. Each market also enjoyed support last year from their central banks - the Bank of England and the Federal Reserve - which began buying government debt as a way of injecting more money into their floundering economies.
Prices are expected to come under pressure as the two nations shoulder larger debt burdens in the wake of the financial crisis. Each market also enjoyed support last year from their central banks - the Bank of England and the Federal Reserve - which began buying government debt as a way of injecting more money into their floundering economies.
[Torygraph Alert]
To understand the meaning of no good deed goes unpunished, Treasury Secretary Timothy F. Geithner can look no further than Wall Street where the banks that received the biggest taxpayer bailouts are seeking to reap trading profits from securities rescued by the government. Only months after it was started, the U.S. program designed to purge debts of no immediate discernable value from the balance sheets of troubled banks has helped transform the frozen debt into a money-maker as the bonds have rallied. Bank of America Corp. and Citigroup Inc., who received 22 percent of the $418.7 billion American taxpayers loaned to troubled financial institutions, boosted holdings on their trading books of home- loan bonds that lack government guarantees while investors were raising cash for the program, according to Federal Reserve data. Charlotte, North Carolina-based Bank of America along with Citigroup, Morgan Stanley and Goldman Sachs Group Inc., all based in New York, added a combined $3.36 billion of the debt, for which there were few buyers as recently as March, to their short-term trading assets during the third quarter, up 16 percent from the second quarter, the most-recent data show.
Only months after it was started, the U.S. program designed to purge debts of no immediate discernable value from the balance sheets of troubled banks has helped transform the frozen debt into a money-maker as the bonds have rallied. Bank of America Corp. and Citigroup Inc., who received 22 percent of the $418.7 billion American taxpayers loaned to troubled financial institutions, boosted holdings on their trading books of home- loan bonds that lack government guarantees while investors were raising cash for the program, according to Federal Reserve data.
Charlotte, North Carolina-based Bank of America along with Citigroup, Morgan Stanley and Goldman Sachs Group Inc., all based in New York, added a combined $3.36 billion of the debt, for which there were few buyers as recently as March, to their short-term trading assets during the third quarter, up 16 percent from the second quarter, the most-recent data show.
The question being, should the progression continue as the changes in the curve shape reflect broad changes in the makeup of the US economy and work force? And would that mean an even broader plateau at a much higher level now?
Well, we could withdraw our forces from overseas. HA, HA, HA. Or perhaps the Chinese will pay in return for the USA providing security for their work force at their new Afghan copper mine. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
2 Jan et seq 3 Jan, 26 wks, not the movie Diversity is the key to economic and political evolution.
what on Earth is the rolling 12-month total final payment?
Smoothing is irrelevant as graphed.
Indemnity paid fter the 26th week is another graph of extended UI payments (indemnity), variable wk 27 - wk 40. As I said, state coverage is variable; some claimants receive less than 40 wks compensation (indemnity). And so on -- BLS tiers 1-4.
All of these persons are counted in establishment survey of (establishment, firm) unemployed persons. However, these persons are not the only unemployed persons in the USA. Diversity is the key to economic and political evolution.
Reporting from Washington - For three decades, Texas congressman and former presidential candidate Ron Paul's extreme brand of libertarian economics consigned him to the far fringes even among conservatives. Not a few times, his views put him on the losing end of 434-1 votes on Capitol Hill. No longer. With the economy still struggling and political divisions deepening, Paul's ideas not only are gaining a wider audience but also are helping to shape a potentially historic battle over economic policy -- a struggle that will affect everything including jobs, growth and the nation's place in the global economy. Already, Paul's long-derided proposal to give Congress supervisory power over the traditionally independent Federal Reserve appears to be on its way to becoming law. His warnings on deficits and inflation are now Republican mantras. And with this year's congressional election campaign looming, the Texas congressman's deep-seated distrust of activist government has helped fuel protests such as the tea-party movement, harden partisan divisions in Washington and stoke public fears about federal spending and the deficit. "People are wondering what went wrong. And they're not happy with what the government is offering up," said James Grant, editor of Grant's Interest Rate Observer, offering an explanation for why seemingly wonkish arguments over interest rate policy and the money supply are spilling over onto ordinary Americans.
No longer. With the economy still struggling and political divisions deepening, Paul's ideas not only are gaining a wider audience but also are helping to shape a potentially historic battle over economic policy -- a struggle that will affect everything including jobs, growth and the nation's place in the global economy.
Already, Paul's long-derided proposal to give Congress supervisory power over the traditionally independent Federal Reserve appears to be on its way to becoming law.
His warnings on deficits and inflation are now Republican mantras. And with this year's congressional election campaign looming, the Texas congressman's deep-seated distrust of activist government has helped fuel protests such as the tea-party movement, harden partisan divisions in Washington and stoke public fears about federal spending and the deficit.
"People are wondering what went wrong. And they're not happy with what the government is offering up," said James Grant, editor of Grant's Interest Rate Observer, offering an explanation for why seemingly wonkish arguments over interest rate policy and the money supply are spilling over onto ordinary Americans.
AKA [Ambrose Evans-Pritchard's Crystal Ball of Doom™ Technology]
Ambrose Evans-Pritchard is nothing if not decisive in his views, and has a undisguised fondness for the bearish perspective. But he was correct on the 2008 inflation/commodities headfake, saying repeatedly that deflationary forces would prevail when that was decidedly a minority view. He is also a Euro-skeptic, and I'm less comfortable with that position.... If things work out badly (and I see the odds of that as reasonably high; China is looking more and more like late 1980s Japan), they will work out very badly, markets are highly connected and if the right dominoes fall, many others go down in fast sequence. So the idea that the amplitude on the downside is likely to be extreme is very plausible. But he has also made a timing as well as a depth call, and sees things unravelling pretty soon. That could prove to be correct, but one thing shorts know all too well is that obvious-seeming outcomes can take much longer to come to pass than they ever thought. Some of his observations seem spot on, in particular, that the Fed will lose its nerve and abandon its efforts to withdraw from quantitative easing, despite noises now to the contrary, that the dollar will rally near-term, and the yen will break. From the Telegraph: The contraction of M3 money in the US and Europe over the last six months will slowly puncture economic recovery as 2010 unfolds, with the time-honoured lag of a year or so. Ben Bernanke will be caught off guard, just as he was in mid-2008 when the Fed drove straight through a red warning light with talk of imminent rate rises - the final error that triggered the implosion of Lehman, AIG, and the Western banking system. As the great bear rally of 2009 runs into the greater Chinese Wall of excess global capacity, it will become clear that we are in the grip of a 21st Century Depression - more akin to Japan's Lost Decade than the 1840s or 1930s, but nothing like the normal cycles of the post-War era. ...The vast East-West imbalances that caused the credit crisis are no better a year later, and perhaps worse. Household debt as a share of GDP sits near record levels in two-fifths of the world economy. Our long purge has barely begun. That is the elephant in the global tent.... Yields on AAA German, French, US, and Canadian bonds will slither back down for a while in a fresh deflation scare. Exit strategies will go back into the deep freeze. Far from ending QE, the Fed will step up bond purchases. Bernanke will get religion again and ram down 10-year Treasury yields, quietly targeting 2.5pc. The funds will try to play the liquidity game yet again, piling into crude, gold, and Russian equities, but this time returns will be meagre. They will learn to respect secular deflation. Weak sovereigns will buckle. The shocker will be Japan, our Weimar-in-waiting...The Bank of Japan will pull the emergency lever on QE. The country will flip from deflation to incipient hyperinflation. The yen will fall out of bed, outdoing China's yuan in the beggar-thy-neighbour race to the bottom. By then China too will be in a quandary. Wild credit growth can mask the weakness of its mercantilist export model for a while, but only at the price of an asset bubble. Beijing must hit the brakes this year, or store up serious trouble. It will make as big a hash of this as Western central banks did in 2007-2008. .... The dollar rally will gather pace. America's economy - though sick - will shine within the even sicker OECD club....Mervyn King's pre-emptive QE and timely devaluation will bear fruit this year, sparing us the worst. By mid to late 2010, we will have lanced the biggest boils of the global system. Only then, amid fear and investor revulsion, will we touch bottom. That will be the buying opportunity of our lives.
If things work out badly (and I see the odds of that as reasonably high; China is looking more and more like late 1980s Japan), they will work out very badly, markets are highly connected and if the right dominoes fall, many others go down in fast sequence. So the idea that the amplitude on the downside is likely to be extreme is very plausible. But he has also made a timing as well as a depth call, and sees things unravelling pretty soon. That could prove to be correct, but one thing shorts know all too well is that obvious-seeming outcomes can take much longer to come to pass than they ever thought.
Some of his observations seem spot on, in particular, that the Fed will lose its nerve and abandon its efforts to withdraw from quantitative easing, despite noises now to the contrary, that the dollar will rally near-term, and the yen will break.
From the Telegraph:
The contraction of M3 money in the US and Europe over the last six months will slowly puncture economic recovery as 2010 unfolds, with the time-honoured lag of a year or so. Ben Bernanke will be caught off guard, just as he was in mid-2008 when the Fed drove straight through a red warning light with talk of imminent rate rises - the final error that triggered the implosion of Lehman, AIG, and the Western banking system. As the great bear rally of 2009 runs into the greater Chinese Wall of excess global capacity, it will become clear that we are in the grip of a 21st Century Depression - more akin to Japan's Lost Decade than the 1840s or 1930s, but nothing like the normal cycles of the post-War era. ...The vast East-West imbalances that caused the credit crisis are no better a year later, and perhaps worse. Household debt as a share of GDP sits near record levels in two-fifths of the world economy. Our long purge has barely begun. That is the elephant in the global tent.... Yields on AAA German, French, US, and Canadian bonds will slither back down for a while in a fresh deflation scare. Exit strategies will go back into the deep freeze. Far from ending QE, the Fed will step up bond purchases. Bernanke will get religion again and ram down 10-year Treasury yields, quietly targeting 2.5pc. The funds will try to play the liquidity game yet again, piling into crude, gold, and Russian equities, but this time returns will be meagre. They will learn to respect secular deflation. Weak sovereigns will buckle. The shocker will be Japan, our Weimar-in-waiting...The Bank of Japan will pull the emergency lever on QE. The country will flip from deflation to incipient hyperinflation. The yen will fall out of bed, outdoing China's yuan in the beggar-thy-neighbour race to the bottom. By then China too will be in a quandary. Wild credit growth can mask the weakness of its mercantilist export model for a while, but only at the price of an asset bubble. Beijing must hit the brakes this year, or store up serious trouble. It will make as big a hash of this as Western central banks did in 2007-2008. .... The dollar rally will gather pace. America's economy - though sick - will shine within the even sicker OECD club....Mervyn King's pre-emptive QE and timely devaluation will bear fruit this year, sparing us the worst. By mid to late 2010, we will have lanced the biggest boils of the global system. Only then, amid fear and investor revulsion, will we touch bottom. That will be the buying opportunity of our lives.
As the great bear rally of 2009 runs into the greater Chinese Wall of excess global capacity, it will become clear that we are in the grip of a 21st Century Depression - more akin to Japan's Lost Decade than the 1840s or 1930s, but nothing like the normal cycles of the post-War era. ...The vast East-West imbalances that caused the credit crisis are no better a year later, and perhaps worse. Household debt as a share of GDP sits near record levels in two-fifths of the world economy. Our long purge has barely begun. That is the elephant in the global tent....
Yields on AAA German, French, US, and Canadian bonds will slither back down for a while in a fresh deflation scare. Exit strategies will go back into the deep freeze. Far from ending QE, the Fed will step up bond purchases. Bernanke will get religion again and ram down 10-year Treasury yields, quietly targeting 2.5pc. The funds will try to play the liquidity game yet again, piling into crude, gold, and Russian equities, but this time returns will be meagre. They will learn to respect secular deflation.
Weak sovereigns will buckle. The shocker will be Japan, our Weimar-in-waiting...The Bank of Japan will pull the emergency lever on QE. The country will flip from deflation to incipient hyperinflation. The yen will fall out of bed, outdoing China's yuan in the beggar-thy-neighbour race to the bottom. By then China too will be in a quandary. Wild credit growth can mask the weakness of its mercantilist export model for a while, but only at the price of an asset bubble. Beijing must hit the brakes this year, or store up serious trouble. It will make as big a hash of this as Western central banks did in 2007-2008.
....
The dollar rally will gather pace. America's economy - though sick - will shine within the even sicker OECD club....Mervyn King's pre-emptive QE and timely devaluation will bear fruit this year, sparing us the worst. By mid to late 2010, we will have lanced the biggest boils of the global system. Only then, amid fear and investor revulsion, will we touch bottom. That will be the buying opportunity of our lives.
What I find particularly interesting is that he "sees" all of these events and their resolution without even mentioning all of the bad debt at the foundation of the crisis or HOW it is to be resolved. Debt for equity swap? As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
A.P. Moller-Maersk has hired former soldiers and an armed escort vessel from Tanzania to protect its fleet in the pirate-infested waters off the Horn of Africa, according to an article in Monday's Copenhagen Post. Maersk hired the ship to protect the tanker Birgit Maersk through former special forces soldiers working for a Danish security firm called Guardian-Global Business Security... Steffen Jacobsen, technical director at Maersk Tankers, said the company checked first to make sure the move was legal. "That's why we chose it as an alternative solution to a very critical situation."
Maersk hired the ship to protect the tanker Birgit Maersk through former special forces soldiers working for a Danish security firm called Guardian-Global Business Security...
Steffen Jacobsen, technical director at Maersk Tankers, said the company checked first to make sure the move was legal. "That's why we chose it as an alternative solution to a very critical situation."
Silicon Valley is beset by the biggest office property glut since the dot-com bust, leaving the U.S. technology hub with empty high-rises and office parks that make it impossible for landlords to sustain average rents. More than 43 million square feet (4 million square meters) -- the equivalent of 15 Empire State Buildings -- stood vacant at the end of the third quarter, the most in almost five years, according to CB Richard Ellis Group Inc. San Jose, Sunnyvale and Palo Alto have 11 empty office buildings with about 3 million square feet of the best quality space. "There is a bubble bursting in much the same way as the residential market burst," said Jon Haveman, principal at Beacon Economics, a consulting firm in San Rafael, California. "None of those towers will fill up anytime soon."
Silicon Valley is beset by the biggest office property glut since the dot-com bust, leaving the U.S. technology hub with empty high-rises and office parks that make it impossible for landlords to sustain average rents.
More than 43 million square feet (4 million square meters) -- the equivalent of 15 Empire State Buildings -- stood vacant at the end of the third quarter, the most in almost five years, according to CB Richard Ellis Group Inc. San Jose, Sunnyvale and Palo Alto have 11 empty office buildings with about 3 million square feet of the best quality space.
"There is a bubble bursting in much the same way as the residential market burst," said Jon Haveman, principal at Beacon Economics, a consulting firm in San Rafael, California. "None of those towers will fill up anytime soon."
Even with that the place doesn't feel empty - during the busy lunch rush a few weeks ago at the strip mall of restaurants near my work my coworker and I were having trouble finding a seat, and I remarked at how overcrowded the valley must have been from 1998-2001.
you are the media you consume.
Not So Radical Reform - BusinessWeek
... rescuing the system is hardly the same thing as reforming it, and a diverse chorus of voices worries that, with the stock market's recovery and the last of the big banks poised to leave TARP, the moment for real change has been squandered. It's not only a concern in the U.S.: In Europe regulators and policymakers so far haven't enacted a single proposal that would overhaul the financial system. "Meaningful regulatory change is urgent now because this is the window of opportunity," warns Simon Johnson, a professor of entrepreneurship at Massachusetts Institute of Technology and a former International Monetary Fund economist. "If that window closes, we're asking for trouble." Paul Volcker, chairman of President Barack Obama's Economic Recovery Advisory Board and former chairman of the Federal Reserve, recently visited nine cities in five countries delivering speeches warning that bankers and regulators around the world "have not come anywhere close to responding with necessary vigor." Volcker wants lawmakers to bust up the big banks. Since the crisis began, the institutions deemed "too big to fail" have only gotten bigger; at the end of 2008 the world's 10 largest banks had 26% of the assets of the top 1,500 banks, up from 18% in 1999. <...> ... the onslaught from the financial services industry continues. The U.S. Chamber of Commerce has focused on the Consumer Financial Protection Agency, a possible component of the bill that Dodd is trying to craft. The lobbying group launched a television advertising campaign titled "No Sleep" to illustrate the sleepless nights of business owners overwhelmed by regulation, and created a Web site to stoke opposition. The campaign follows a grassroots effort in August to block the formation of the agency; back then bankers visited lawmakers in 36 states and wrote more than 75,000 letters to Congress, according to David Hirschmann, head of the Center for Capital Markets Competitiveness, a Chamber-led initiative focused on financial regulation. It's possible public anger could yet fuel a regulatory push. Banks will start giving bonuses to their employees in January; the bigger the payouts, the bigger the potential outrage. Senators John McCain (R-Ariz.) and Maria Cantwell (D-Wash.) on Dec. 16 proposed a bill that would reinstate the 1933 Glass-Steagall Act, which separated commercial banking from investment banking until its partial repeal in 1999. "Wall Street firms have recovered nicely and profits are soaring," McCain said in a press conference, while "Main Street is suffering terribly." The same day Representative Maurice Hinchey (D-N.Y.) put forth similar legislation in the House. But even he thinks it's a long shot: "There's a lot of pressure coming from the big banks to prevent this kind of thing from happening." A failure wouldn't surprise frustrated lawmakers disappointed by the turn in Washington. "My greatest fear for the last year has been an economic collapse," says Representative Brad Miller (D-N.C), who sits on Frank's House Financial Services Committee. "My second greatest fear was that the economy would stabilize and the financial industry would have the clout to defeat the fundamental reforms that our nation desperately needs. My greatest fear seems less likely...but my second greatest fear seems more likely every day."
<...>
... the onslaught from the financial services industry continues. The U.S. Chamber of Commerce has focused on the Consumer Financial Protection Agency, a possible component of the bill that Dodd is trying to craft. The lobbying group launched a television advertising campaign titled "No Sleep" to illustrate the sleepless nights of business owners overwhelmed by regulation, and created a Web site to stoke opposition. The campaign follows a grassroots effort in August to block the formation of the agency; back then bankers visited lawmakers in 36 states and wrote more than 75,000 letters to Congress, according to David Hirschmann, head of the Center for Capital Markets Competitiveness, a Chamber-led initiative focused on financial regulation.
It's possible public anger could yet fuel a regulatory push. Banks will start giving bonuses to their employees in January; the bigger the payouts, the bigger the potential outrage. Senators John McCain (R-Ariz.) and Maria Cantwell (D-Wash.) on Dec. 16 proposed a bill that would reinstate the 1933 Glass-Steagall Act, which separated commercial banking from investment banking until its partial repeal in 1999. "Wall Street firms have recovered nicely and profits are soaring," McCain said in a press conference, while "Main Street is suffering terribly." The same day Representative Maurice Hinchey (D-N.Y.) put forth similar legislation in the House. But even he thinks it's a long shot: "There's a lot of pressure coming from the big banks to prevent this kind of thing from happening."
A failure wouldn't surprise frustrated lawmakers disappointed by the turn in Washington. "My greatest fear for the last year has been an economic collapse," says Representative Brad Miller (D-N.C), who sits on Frank's House Financial Services Committee. "My second greatest fear was that the economy would stabilize and the financial industry would have the clout to defeat the fundamental reforms that our nation desperately needs. My greatest fear seems less likely...but my second greatest fear seems more likely every day."
Dark complement to Paul Krugman's last column. La Chine dorme. Laisse la dormir. Quand la Chine s'éveillera, le monde tremblera.
Paul Volcker: The Lion Lets Loose - BusinessWeek
Isn't that exactly what they do on Wall Street? They basically say, if you've brought in $50 billion worth of business, then we're prepared to give you a huge income?Sometimes they do it on the basis of stock and sometimes not. That isn't going to solve all the problems, I agree. But you take the trading guy who says: "I brought in $100 million worth of profits, therefore I want $25 million." Have they really taken into account that this trading guy is going on [the firm's] reputation, capital, and risk when he went out there and made the $100 million? If he's so good, let him go out and do it himself. Wall Street has a history of creating financial instruments that will meet any new challenge. Any reason to believe that's going to stop?No. They will continue to try to get around all these restrictions. You have to have a much stronger supervisory and regulatory apparatus to have any chance of keeping up with that. You feel strongly that the financial system has gotten out of whack. Do you think the American political process is capable of fixing it?The American political process is about as broken as the financial system. Therefore, one has to be a bit skeptical. Just to give you one little example, one unrelated to the financial crisis. Here we are on Dec. 29, almost a year after the Inauguration, and there is no Under Secretary of the Treasury. That should be an important position. How can we run a government in the middle of a financial crisis without doing the ordinary, garden-variety administrative work of filling the relevant agencies? The Treasury is an outstanding example of a broken system, but it's not the only one. Is part of the problem that Congress is slow in the process of approving?Slow is too fast a word to describe what's going on. The Administration is one quarter over, and it hasn't manned the ramparts of government yet. So it's the Administration's problem? They haven't gotten their Executive Branch in place?It's partly a reflection of the discord in government and extreme views on either side and fighting each other for every scrap of advantage. In interviews in the past you said that's why we needed to change the political process; that's why you thought that candidate Obama was the best choice for President.True. But has he been able to do that at this point? It doesn't look that way. I think that's unfortunate. I wish the Administration would pay more attention to what's needed to improve the ordinary functioning of government. We can't even fight a war with our own people any more. We've got to hire Blackwater. I think people have lost confidence in government, they've lost trust in government, and it shows. This isn't a question just of this Administration. It's been kind of a steady, downhill path. Yes, but this Administration came in and said it would change. That was the mantra of the campaign. So what happened?It shows you it's not that easy to change.
Isn't that exactly what they do on Wall Street? They basically say, if you've brought in $50 billion worth of business, then we're prepared to give you a huge income?Sometimes they do it on the basis of stock and sometimes not. That isn't going to solve all the problems, I agree. But you take the trading guy who says: "I brought in $100 million worth of profits, therefore I want $25 million." Have they really taken into account that this trading guy is going on [the firm's] reputation, capital, and risk when he went out there and made the $100 million? If he's so good, let him go out and do it himself.
Wall Street has a history of creating financial instruments that will meet any new challenge. Any reason to believe that's going to stop?No. They will continue to try to get around all these restrictions. You have to have a much stronger supervisory and regulatory apparatus to have any chance of keeping up with that.
You feel strongly that the financial system has gotten out of whack. Do you think the American political process is capable of fixing it?The American political process is about as broken as the financial system. Therefore, one has to be a bit skeptical. Just to give you one little example, one unrelated to the financial crisis. Here we are on Dec. 29, almost a year after the Inauguration, and there is no Under Secretary of the Treasury. That should be an important position. How can we run a government in the middle of a financial crisis without doing the ordinary, garden-variety administrative work of filling the relevant agencies? The Treasury is an outstanding example of a broken system, but it's not the only one.
Is part of the problem that Congress is slow in the process of approving?Slow is too fast a word to describe what's going on. The Administration is one quarter over, and it hasn't manned the ramparts of government yet.
So it's the Administration's problem? They haven't gotten their Executive Branch in place?It's partly a reflection of the discord in government and extreme views on either side and fighting each other for every scrap of advantage.
In interviews in the past you said that's why we needed to change the political process; that's why you thought that candidate Obama was the best choice for President.True. But has he been able to do that at this point? It doesn't look that way. I think that's unfortunate. I wish the Administration would pay more attention to what's needed to improve the ordinary functioning of government. We can't even fight a war with our own people any more. We've got to hire Blackwater. I think people have lost confidence in government, they've lost trust in government, and it shows. This isn't a question just of this Administration. It's been kind of a steady, downhill path.
Yes, but this Administration came in and said it would change. That was the mantra of the campaign. So what happened?It shows you it's not that easy to change.
Why oh why didn't Obama choose Volcker instead of Summers to be his chief economic adviser?
The American political process is about as broken as the financial system.
and
I think people have lost confidence in government, they've lost trust in government, and it shows.
Nice and tight, the way I like it. In the end, might makes right. Nothing has changed since the caveman.
Feinberg, a 64-year-old lawyer with an often-booming voice and pronounced Boston accent, has said jokingly that he loves "jobs that seem so hard that they have a low bar for success." This one, for which he is not accepting a salary, fits the bill. In proposals from the TARP Seven and in confrontations that followed the August deadline, Feinberg would hear arguments that Main Street America would find incredible. Citigroup and Bank of America, for example, concluded that everyone in their executive suites was above average when compared with peers at other giant banks that didn't need a bailout. Or there was A.I.G.'s behind-closed-doors argument against Feinberg's directive to pay its top people in large part with A.I.G. stock. The company's reasoning? That the stock -- trading briskly at the time at around $40 on the New York Stock Exchange -- was actually worthless. Yet Feinberg would be pushed by staff at Treasury and officials of the Federal Reserve Bank to accept that argument and others in order to keep the captains of these broken companies from quitting.Feinberg's other constituency -- the rest of America, as represented by members of Congress -- wasn't so eager to placate the executives. Barney Frank, the Massachusetts Democrat who is the chairman of the House Financial Services Committee and whose views on this flash-point issue reflected a broad sentiment, told me recently that his attitude was, and is: "Let 'em quit. Who needs them? How can we reward the same people who screwed up in the first place?" Indeed, if to many on Wall Street the spectacle of their best and brightest reduced to submitting payroll permission slips to government bureaucrats was a dangerous exercise in populist pandering, to almost everyone else it was an overdue reckoning. When Feinberg announced his pay packages in late October, he found a way to give something to everyone. The public enjoyed a measure of revenge: Feinberg's ultimate rulings looked hard-nosed when compared with what the executives used to make. Yet the leaders of these failed companies still ended up winning big paydays -- an average of $6.5 million to each Bank of America executive and $6.2 million to those at Citigroup. Meantime, the Obama administration looked tough on fat-cat compensation, even as it quietly cajoled Feinberg to ease up on some of the restrictions he wanted to impose.
Feinberg, a 64-year-old lawyer with an often-booming voice and pronounced Boston accent, has said jokingly that he loves "jobs that seem so hard that they have a low bar for success." This one, for which he is not accepting a salary, fits the bill. In proposals from the TARP Seven and in confrontations that followed the August deadline, Feinberg would hear arguments that Main Street America would find incredible. Citigroup and Bank of America, for example, concluded that everyone in their executive suites was above average when compared with peers at other giant banks that didn't need a bailout. Or there was A.I.G.'s behind-closed-doors argument against Feinberg's directive to pay its top people in large part with A.I.G. stock. The company's reasoning? That the stock -- trading briskly at the time at around $40 on the New York Stock Exchange -- was actually worthless. Yet Feinberg would be pushed by staff at Treasury and officials of the Federal Reserve Bank to accept that argument and others in order to keep the captains of these broken companies from quitting.
Feinberg's other constituency -- the rest of America, as represented by members of Congress -- wasn't so eager to placate the executives. Barney Frank, the Massachusetts Democrat who is the chairman of the House Financial Services Committee and whose views on this flash-point issue reflected a broad sentiment, told me recently that his attitude was, and is: "Let 'em quit. Who needs them? How can we reward the same people who screwed up in the first place?" Indeed, if to many on Wall Street the spectacle of their best and brightest reduced to submitting payroll permission slips to government bureaucrats was a dangerous exercise in populist pandering, to almost everyone else it was an overdue reckoning.
When Feinberg announced his pay packages in late October, he found a way to give something to everyone. The public enjoyed a measure of revenge: Feinberg's ultimate rulings looked hard-nosed when compared with what the executives used to make. Yet the leaders of these failed companies still ended up winning big paydays -- an average of $6.5 million to each Bank of America executive and $6.2 million to those at Citigroup. Meantime, the Obama administration looked tough on fat-cat compensation, even as it quietly cajoled Feinberg to ease up on some of the restrictions he wanted to impose.
