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The Obama Department of Justice has been attacked from both sides for its post-financial crisis approach. Some, like the senator Elizabeth Warren, believe it was insufficiently aggressive and followed a “too big to jail” policy. Others, including many in the banking industry, believe it acted wrongly in extorting huge penalties from banks for relatively venal sins.

Because of DoJ independence, my work in the White House gave me no window into specific cases. I have tended to sympathise with the department given the contradictory nature of the critics’ attacks and the complexity of the issues involved. Read more

Steven Mnuchin

Steven Mnuchin  © Getty Images

As I learnt (sometimes painfully) during my time at Treasury, words spoken by Treasury secretaries can over time have enormous effects and therefore should be carefully considered. In this regard, I am very surprised by two comments made by Steven Mnuchin in his first public interview last week.

In reference to a question about artificial intelligence displacing American workers, Secretary Mnuchin responded that: “I think that is so far in the future — in terms of artificial intelligence taking over American jobs — I think we’re like so far away from that (50 to 100 years) that it is not even on my radar screen”. He also remarked that he did not understand tech company valuations in a way that implied that he regarded them as excessive. I suppose there is a certain internal logic. If you think AI is not going to have any meaningful economic effects for a half century than I guess you should think that tech companies are overvalued. But neither statement is defensible. Read more

President Enrique Peña Nieto of Mexico (left ) and China's President Xi Jinping

President Enrique Peña Nieto of Mexico (left ) and China's President Xi Jinping  © Getty Images

I was in Mexico yesterday seeing the country’s president, foreign minister and finance minister and addressing a convention of bankers. The only subjects anyone is interested in are the future of Nafta and US-Mexican relations.

I came to Mexico from Beijing and so was able to report that there was no greater strategic gift the US could give China than to abrogate Nafta and rupture the North American community.

In narrow commercial terms right now, Mexican goods enter the US on a preferred basis relative to Asian goods. This preference would disappear with suspension of the free trade agreement. Furthermore, about 70 per cent of Mexican exports are of goods that are not finished but are inputs to further US production. Anything that hurts Mexico therefore also hurts us in global economic competition with China. Read more

Phil Mickelson: Master of the long swing

Phil Mickelson: master of the long swing  © Getty Images

McKinsey has a new study out on an important topic — the question of whether companies systematically take too short a view and do not invest enough for the long term. If true, as many chief executives believe, this is a serious indictment of current corporate governance arrangements and has important policy implications. To take one close to my heart, if short-termism causes under-investment it will be a cause of secular stagnation.

I am not sure what to believe in this area. On the one hand, there are many anecdotes suggesting that pressures to manage earnings hold back investment. And the short-termist view is very widely believed.

On the other hand, some of what is done in the name of the long term may be unmonitored waste. The observation that many “unicorn” companies with no profits, and sometimes no revenues or even fully developed products, get valued so highly makes me sceptical of the idea that the capital market is systematically myopic. It is also the case that the companies generating the highest immediate cash flows — which should be overvalued on the myopia theory — have historically had the highest stock market returns, implying undervaluation rather than overvaluation. Read more

Coal depot at the Savage Energy Terminal, Utah  © Getty Images

Ideas should be judged by their quality not their pedigree. I am not usually a fan of Republican tax policy proposals or environmental initiatives. But I strongly support the proposal put forward on Wednesday by Republicans George Shultz, James Baker, Martin Feldstein, Hank Paulson, Greg Mankiw and others for a substantial carbon tax in the US to address global climate change. Their proposal that the carbon tax be coupled with a mechanism for rebates to consumers, a rollback of command-and-control regulation and a border adjustment mechanism is also sound. Read more

Gary Cohn at the White House for a swearing in ceremony

Gary Cohn at the White House for a swearing in ceremony  © Getty Images

Many business people think it is wonderful that we now have an administration filled with people from business backgrounds. To a point, I relate. People who have worked primarily in the private sector bring an awareness that others sometimes lack of maintaining business confidence, which as I have often said is the cheapest form of stimulus. And for some government tasks, management experience is much more important than policy experience. That is why Bob Rubin and I worked to install a (Republican) business leader as commissioner of the Internal Revenue Service given its vast IT problems.

Unfortunately, just as being able in government does not equip you to step in and run a company — at least not without much help — so business experience does not equip you to run on your own public policy and political processes. Read more

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I did an interview with Adi Ignatius, the editor of the Harvard Business Review, where I got a chance to spell out my views on the role of business leaders in influencing public policy. It is a complex issue given chief executives’ obligations to their shareholders, desire to be effective, fears of retaliation and much else.

Just before the inauguration I expressed strongly the fear that American business leaders in Davos were legitimising the excessively problematic policy approaches of the new president, Donald Trump. Read more

Last week, the Trump rally continued as the Dow crossed 20,000 and the president issued a celebratory tweet. How much does this mean? To what extent is it a vindication of the economic policy approaches pursued by the new administration? Will the post-election rally continue? No one knows these answer and market timing is a fool’s game but I remain persuaded that markets and the economy are most likely enjoying a sugar high that will not last a year.

First, Dow 20,000 is a meaningless benchmark and crossing it means little. It is numerology not analysis to focus on round numbers. The Dow is an odd and arbitrary index that weights companies by their share price not their market value. It is highly limited in who is included, with Goldman Sachs accounting for over 20 per cent of the gain in the 30-stock index since election day. Read more

I wonder what the business leaders who have been waxing enthusiastic about our new pro-business administration are thinking right now.

Confidence and prosperity depend on a perception of government credibility and confidence. Is that present when an administration lies about readily observable facts like crowd sizes and then defends the lie with the Orwellian concept of alternative factsRead more

Edmund Burke famously cautioned that “the only thing necessary for the triumph of evil is for good men to do nothing.” I have been reminded of Burke’s words as I have observed the behavior of US business leaders in Davos over the last few days. They know better but in their public rhetoric they have embraced and enabled our new president and his policies.

I understand and sympathise with the pressures they feel. I used to remind my colleagues in the Obama White House that “confidence is the cheapest form of stimulus”. There is a clear case for corporate tax reform, for some targeted regulatory relief and a more positive government attitude towards business. Businesses who get on the wrong side of the new president have lost billions of dollars of value in 60 seconds because of a tweet. And you cannot hope to have influence on an administration you go out of the way to condemn. Read more