The Flat Earth Society has all but disappeared, but the efficient-market hypothesis is alive and well. This week, the Nobel Memorial Prize in Economic Sciences was awarded to its most tenacious advocate, Eugene F. Fama of the University of Chicago.
Now that Lawrence Summers has taken himself out of the running to become the next chairman of the Federal Reserve, President Barack Obama should look for a truly “post-crisis” candidate who can reassert the Fed’s independence and move away from the unusual policies of the last six years.
Thirteen years ago, when the hedge fund Long-Term Capital Management was desperately negotiating with Wall Street banks for a bailout, Jon Corzine, the chief executive officer of Goldman Sachs Group Inc., called John Meriwether, LTCM’s founder, and read him the riot act. Wall Street would invest, Corzine said, but “JM” would have to accept more controls, including strict supervision over his firm’s trading limits.
“Forgive me,” began Charles Ferguson , the director of “Inside Job,” while accepting his 2011 Oscar for best documentary. “I must start by pointing out that three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that’s wrong.”
There is something about pensions that makes their sponsors just want to say no. For months we have been reading about cities and states failing to pay what is due into employee pension funds. Now corporate America is getting into the act.
Give credit for courage to Erskine Bowles and Alan Simpson , leaders of the White House bipartisan commission on the U.S. deficit. Their proposal gores some sacred cows on spending and taxes, and is a good first stab at repairing the budget.
Bonuses to senior executives are shooting up. They’re a good reminder of what Congress forgot when it was reforming the financial system. Excessive pay isn’t a problem just at banks; it’s endemic to the culture of corporate America.
Howard Buffett, a Republican congressman from Nebraska and the future billionaire’s father, once gave back a $2,000 annual pay raise because, he insisted, he had been elected at the lower salary and it would be wrong to take the money. Perhaps that was a forerunner of his famous son, who is publicly advocating higher taxes on the wealthy, including, potentially, on himself.
The tax compromise that the president, after protracted bargaining with Congress, signed into law Friday represents the worst of each party’s principles. Democrats agreed to forgo their insistence on raising taxes to narrow the widening budget deficit. Republicans forgot (again) that they are supposedly the party of smaller government.