Rep. Darrell Issa of the House Oversight and Government Reform Committee: ”The committee has already learned that Ben Bernanke and the Federal Reserve made inappropriate threats to fire Bank of America management unless they went ahead with the ‘shotgun wedding’ that was the Merrill Lynch acquisition. The Federal Reserve also engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies.”
Politics and policy from inside Washington
Here is your bottom line: The Fed seems to think growth is ready to resume this year. It doesn’t think inflation will be a problem as long as the economy is operating under its growth potential. Rates aren’t going to budge until at least late 2010.
Warren Buffett just did a spot on CNBC. A few bits: Buffett thinks Obama should reappoint Bernanke; he doesn’t see any green shoots; he wants Obama to slowdown on cap-and-trade and healthcare; he caledl cap-and-trade a fairly “regressive tax.” … My favorite quote: “Can’t produce a baby in one month by getting nine women pregnant.”
Matthew Cooper posits this theory:
Obama’s poll numbers have been going down, although they remain high. Why are they going down? A lot of it seems to have to do with spending and government intervention in the economy, which has roused fears of independents. 70 percent of respondents in the NBC News/Wall Street Journal poll said that they were concerned “a great deal” or “quite a bit” about the GM takeover.
I have a slightly different spin on this, which is that it’s the spending and the modest success it seems to have brought in stopping the total collapse of the banking and financial system. If the economy felt like it was in the same free fall that it was a few months ago, he’d be doing better because there’d be less questioning of government spending and more calls to pour everything on the fire. But with the respite in the fall comes the freedom to question spending. Or, to put it another way: The firemen saved your house but now you’re pissed off about all the water damage in the den.
My spin: That is one theory. How about this one: unemployment is going through the roof! While people are less worried about economic collapse, they are plenty worried about their job. Plus, their home is still falling pis e. It is not “all that spending” so much as the perception that “all that spending” does not seem to be helping much.
From RDQ Economics:
New and existing home sales, housing starts, building permits, and homebuilder sentiment all appear consistent with the picture of a bottoming out in housing activity, albeit at very low levels. It seems likely that the drag from housing on GDP growth in the second half of the year will be significantly smaller than the average subtraction of 1.0% point per quarter over the last three years.
Me: Less of a drag on GDP, sure. But no rising home prices …
What sort of compensation might work better to align executive compensation with long-term shareholder interests? A group of academics — Alex Edmans of Wharton, Xavier Gabaix and Tomasz Sadzik of New York University and Yuliy Sannikov of Princeton — have devised an approach based on what they call “dynamic incentive accounts.”
Unlike bonus clawbacks, this system doesn’t try to recoup money already sent out the door.
Here is how it works, according to their new study: Executive pay is escrowed into an account, a fraction of which is invested in the firm’s stock and the remainder in cash. The account would be rebalanced each month according to company guidelines — rules would certainly also vary by industry — and by how close the executive is to retirement.
The gradual vesting of the account — cash from a sold stock cannot quickly withdrawn — even after retirement, “allows the CEO to consume while simultaneously deterring myopic actions.”
In other words, the goal is to promote long-term thinking over short-term manipulation.
For instance: If company’s stock soared, the executive could sell, though the proceeds would say in the account. If the stock then dropped, that money would have to be used to buy more stock. He couldn’t just take the money and run.
Is this the best system out there?. Maybe, maybe not. Or maybe for some firms or sectors and not for others. But that is why you don’t want a one-size-fits-all plan devised in Washington, particularly one with political rather than economic goals. That is a pothole that Barack Obama and Timothy Geithner have so far avoided.
Forty-seven percent (47%) of Americans oppose more government regulation of the U.S. financial system, while 33% disagree and say more regulation is a good idea, according to a new Rasmussen Reports national telephone survey.
But just 23% of adults favor giving the Federal Reserve Board more regulatory control. Fifty-one percent (51%) oppose expanding the Fed’s regulatory powers.
Americans are closely divided over President Obama’s plan to create a new government agency to regulate what banks, mortgage lenders and credit cardcompanies offer Americans. Thirty-nine percent (39%) support the creation of such an agency, but 44% are opposed to establishing another federal regulatory body.