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 elsewhere:
Did low interest rates or regulatory failures cause the bubble? – Economist’s View
The roots of American dominance – Free Exchange
Changing times: Global governance reform and the IMF – IMF Direct
Financial globalisation has improved international risk sharing – VoxEU
Bubble denial – Paul Krugman

From the FT:
How to avoid a repeat of the Great Crash – Peter Clarke
Goldman: reasons to be wrathful – Chris Gradel
A three-way split is the most logical
– John Gapper on ‘too big to fail’
Russia’s unsustainable energy model – David Clark

From elsewhere:
A Balanced Global Diet – Nouriel Roubini, RGE Monitor
Chinese railways and speculating pig farmers – Michael Pettis , China Financial Markets
Efficient Market Theory and the Crisis – Jeremy J. Siegel
Futures As Predictors of Commodity Prices – Menzie Chinn, Econbrowser
Turkey Dumps US Dollar For Trade With Iran And China – Joe Weisenthal, BusinessInsider
Why Do Financial Crises Happen in the Fall? – Catherine Rampell, NYT Economix Blog
Are Capital Controls In Fashion Again? – Nouriel Roubini, Forbes

From the FT:

Do not ignore the need for financial reform – George Soros
A polite discourse on bankers and bubbles – Wolfgang Münchau
The Fund should help Brazil to tackle inflows – Arvind Subramanian and John Williamson
Grim Britain – FT Editorial Read more

This post by Martin Wolf in the Financial Times’ Economists’ Forum shows the effects of quantitative easing.  Read more

From FT:

Time for the ECB to get serious about the overvalued euro – Willem Buiter Read more

Elinor Ostrom and Oliver Williamson won the prize today for their work on how economic transactions operate outside markets in common spaces and within companies. Prof Ostrom is the first woman to win the prize.

Further information on the winners: Read more

From the FT:

Wolfgang Münchau: Making the case for a weaker dollar Read more

By Thomas Palley

Over the past year the global economy has experienced a massive contraction, the deepest since the Great Depression of the 1930s. But this spring, economists started talking of “green shoots” of recovery and that optimistic assessment quickly spread to Wall Street. More recently, on the anniversary of the Lehman Brothers crash, Ben Bernanke, Federal Reserve chairman, officially blessed this consensus by declaring the recession is “very likely over”. Read more

From the FT:

Dave Shellock: Overview: gold hits record high as dollar tumbles Read more

From the FT:

Michael Milken: Prosperity rests on human and social capital Read more

By Per Kurowski

There is no reason to believe the world would be better if financial regulators provided extra incentives to those who, perceived as having a lower default risk, are already favoured by lower interest rates, or punish further those who, perceived as more risky, are already punished by higher interest rates. In fact, the opposite is probably true. Read more

By Michael Pomerleano

I was in Chicago last week to participate in the 12th Annual International Banking Conference sponsored by the Federal Reserve Bank of Chicago and the World Bank. The answer to the question posed — have the rules of the global financial game really changed? — is a resounding no.

This was my first week back in the US after being away for three years, and the conference gave me an opportunity to gauge the state of the debate there. Compared to my two years at the Bank of International Settlements in Basel and my year at the Bank of Israel, the openness of the debate and the quality of the discussions in Chicago were refreshing. However, in the US — the epicentre of the crisis and the country that is supposed to lead the world toward reform and out of the crisis — I expected a far more forceful articulation of remedial measures. Read more