Daily Archives: January 26, 2010

Ferguson illustration

Today, the people see in the financial sector not the skilful hands of erstwhile masters of the universe, but the grabbing hands of greedy ingrates. It is little wonder, then, that a desperate President Obama, battered by the voters in Massachusetts, has turned upon a group even less popular than his party. He has duly added the axe of Paul Volcker, 82-year-old former chairman of the Federal Reserve, to the regulatory scalpel offered by his Treasury secretary, Tim Geithner. Read more

By Michael Pomerleano and Andrew Sheng

As the Financial Crisis Inquiry Commission begins looking at the causes of the recent financial crisis, we need to consider that crisis is a failure of governance. Lucian Bebchuk from Harvard Law School has written extensively on the failure of private sector governance: boards that failed to make informed judgments or control the risks incurred by their institutions, self-serving management that lost control over reckless risk taking and compensation systems that invited speculation by traders. Although Sheila Bair, chair of the Federal Deposit Insurance Corporation (FDIC), has openly expressed her discontent with the governance of the banks and the FDIC is considering tying premiums to compensation, we are likely to witness the largest bonus season the industry has ever seen. Read more

From the FT:
Bernanke’s battle – Editorial comment
How to bypass populism and tackle banking – Arthur Levitt
A better way to reduce financial sector risk – Raghuram Rajan
Where the Walker Review stops short – Hugo Banziger

From elsewhere:
The second Clinton? – The Baseline Scenario
A road not taken – Economic Principals
The economic case against Bernanke – Naked Capitalism
Is the ‘Volcker rule’ more than a marketing slogan? – Realtime economic issues watch
Too interconnected to fail = too big to fail: What is in a leverage ratio? – VoxEU
The Bernanke conundrum – Paul Krugman for the New York Times