Billionaire financier George Soros has pledged $50 million to create a new think-tank to "develop fresh approaches to economic theory." The Financial Times reports:
Mr Soros, who has long been a critic of economic "fundamentalism", blames the unwavering belief in unchecked free markets, which remains pervasive in universities, for allowing financial markets and asset prices to melt down. Through INET, he will be indirectly funding his philosophy of "reflexivity" -- that markets tend to influence perceptions of reality, which in turn feed back into markets.
"The ideologists in the free markets are still in command and I think they'll be very difficult to remove because they have tenure," Mr Soros said in an interview with the Financial Times.
"I think that the financial crisis has proven that is unrealistic," Mr Soros said of the prevailing economics literature, which assumes that people behave rationally. "The dogma has lost touch with reality."
The board of the Institute of New Economic Thinking, is made up of a number of well known economists including: George Akerlof, Kenneth Rogoff, Joseph Stiglitz and Sir James Mirrlees. The Institute will fund research, sponsor conferences and establish a journal.
If you had any doubt that this is the Recession Generation, just take it from Larry Summers. The White House economic adviser is scheduled to address the Economist's Buttonwood Gathering in New York today. The White House sent over Summers' prepared remarks, including this bit (links added):
Surely a system that produces this many accidents and accidents this severe is a system that is in very much need of reform.
In the prepared remarks, Summers goes on to praise the House Financial Services Committee for moving to regulate derivatives and makes no mention of the exemption for 98 percent of banks from independent exams by a new consumer protection agency.
The calendar kept by Treasury Secretary Tim Geithner shows he talked to the biggest names in banking at least 80 in his first seven months in office, a review by the Associated Press reveals.
First he called Lloyd Blankfein, the chairman and CEO at Goldman. Then he called Jamie Dimon, the boss at JPMorgan. [President] Obama called next, and as soon as they hung up, Geithner was back on the phone with Dimon.
While all this was going on, Geithner got a call from Rep. Xavier Becerra, a California Democrat who serves on committees that help set tax and budget policies.
Becerra left a message.
A Treasury spokesperson says it's appropriate for the secretary to stay in touch with the banks, especially in the middle of a banking crisis.
Simon Johnson has a slightly different take, questioning how Geithner could have gotten "an accurate picture of conditions in the entire crisis-ridden financial sector primarily from talking to a few top bankers?" Johnson writes:
Geithner's phone calls were primarily to and from people he knew well already -- who had cultivated a relationship with him over the years, shared nonprofit board memberships, and participated in the same social activities. These are close professional colleagues and in some cases, presumably, friends.
The Obama administration had to rescue large parts of the financial sector, given the situation they inherited. But it absolutely did not have to run the rescue in this exact fashion -- bending over backwards to be nice to leading bankers and allowing their banks to become even larger. Saving top executives' jobs under such circumstances is not best practice, it's not what the US advises to other countries, it's not what the US tells the IMF to implement when it helps clean up failed banking systems, and it's not what the FDIC implements for failed banks under its auspices.
Glen Pizzolorusso at the wheel of his Range Rover, one of five cars he owned before the subprime mortgage market went bust. (Courtesy of Glenn Pizzolorusso)
[Ed: We're bumping this post up for the folks coming in from This American Life. Also, for the dialog with its author that has broken out in the comments.]
Glen Pizzolorusso got his start in the mortgage industry in his father's company, at age 14. Still in his 20s, by 2007 he'd worked his way up to running his own sales team, making $100,000 a month and helping to inflate the bubble that became the current global economic crisis. When that bubble burst, he told us the story for This American Life's Giant Pool of Money episode.
Here, Pizzolorusso writes about the difference between his old definition of success and his new one.
I see a Porsche convertible drive by, sky blue, tan leather interior, gorgeous, and immediately a feeling of envy comes over me. I think that's a natural feeling, but I can't help wondering what is the motivation behind the purchase of such an expensive piece of machinery. Is it a burning desire to own the pinnacle of German automobile engineering? Is it a love for speed, wind blowing in your face, freed from the perils of Corporate America? Or is it a symbol of success, a long career, countless promotions, 60-hour workweeks, a remedy for the stress that accompanies such dedication?
For me, it was all of the above. After seven long years of 60+ hours a week in the subprime mortgage industry, I had achieved what I had set out to accomplish: success.
File this under "unofficial and unusual sources," as Reuters puts it: Bernie Madoff is dying of cancer, the New York Post reports his fellow inmates say. From the NY Post:
Bernie Madoff had little to lose by confessing to masterminding the world's biggest Ponzi scheme -- he's dying of cancer, sources told The Post.
The Post says Madoff's lawyer would neither confirm nor deny reports that his client is terminally ill and taking more than a dozen medications a day. The same jailhouse sources say the Ponzi schemer, who's serving his 150-year sentence in North Carolina, has stripped off his shirt for Native American sweat lodge ceremonies with other prisoners. One anonymous prisoner tells the tabloid Madoff has been making friends with Native Americans and gay prisoners. The former financier is now working at painting fences.
UPDATED: The New York Times reports that prison officials say Madoff doesn't have cancer and isn't terminally ill. (Hat tip to our pals at The Two-Way.)
Bernie Madoff aide Frank DiPascali pleaded guilty today to charges including securities fraud, falsifying records and international money laundering. DiPascali told the federal court in Manhattan he'd been a knowing part of a scam. From the Wall Street Journal (subs. requ'd.):
"It was all fictitious. It was wrong, and I knew it at the time."
DiPascali, Madoff's former director of options trading, could get 20 years apiece for the fraud and money-laundering charges. His old boss is now serving 150 years in North Carolina.
Director, no more. (Chip Somodevilla / Getty Images)
By Mathew Katz
James B. Lockhart III, the director of the Federal Housing Finance Agency, is stepping down, saying he wants to spend more time with his family. Lockhart was in charge of the agency, which now controls both Fannie Mae and Freddie Mac, and its predecessor for the past three years, and has been criticized for allowing the two companies to engage in risky subprime lending.
He's also the one who helped orchestrate their takeover by the government and fought former executives in court to deny them so-called "golden parachute." Lockhart was a Bush appointee who grew up with the former president. In a speech last week, he hinted that it's unlikely that Fannie Mae and Freddie Mac will ever pay back the $85 billion in assistance the government gave them, and that it's likely they'll need to draw on more government financing soon.
He's got a lot to say. (Robert Giroux / Getty Images)
By Laura Conaway
Maybe it's just me, but former Federal Reserve Chairman Alan Greenspan seems a lot more talkative these days. Greenspan turned up on ABC over the weekend with a bouquet of opinions:
The Treasury Department just released its updated "bad guy list" of suspected terrorists and people we're not allowed to do business with.
Some of the people have more A.K.A.'s than you'd find in a James Bond film -- though that seems mostly due to confusion about how to write an Arabic name for English speakers. Like, is it "Mousab" or "Mossab" or "Mus'ab," or maybe "Mossaab"?
This guy has 46 A.K.A's:
ABD EL-OUADOUD, Abi Mossaab (a.k.a. ABD AL-WADOUB, Abdou Moussa; a.k.a. ABD EL OUADOUD, Abou Mossab; a.k.a. ABD EL OUADOUD, Abou Mousab; a.k.a. ABD-ALWADUD, Abu-Mus'ab; a.k.a. ABDEL ELWADOUD, Abu Mossaab; a.k.a. ABDEL WADOUD...
It's not over yet for Ruth Madoff, the wife of fraudster Bernie Madoff. The trustee liquidating Bernie's business is suing Ruth for $44.8 million, saying that she profited for years off his Ponzi scheme. The trustee, Irving Picard, said that she received at least $23.7 million directly or indirectly from Bernie's firm.
Ruth Madoff's already lost her husband, her glamorous Upper East Side apartment (she's likely downgrading to a one-bedroom!), and most of her property, which the government is selling to repay Bernie's victims. After Bernie's assets were seized, prosecutors allocated $2.5 million to Ruth, but that's likely to dwindle fast as legal fees continue to mount.
How much did you ever know about the personal life of Alan Greenspan?
All of a sudden, ordinary folks care about the Federal Reserve -- and the person who runs it. Fed Chairman Ben Bernanke has been all over the news lately, and not just as a policy wonk. In March, he gave a lengthy interview to 60 Minutes, which included a tour of his hometown. Yesterday, he spent an hour answering questions in a town-hall session in Kansas City. Compare that to Greenspan, who gave only one televised interview in his entire run as Fed Chief.
This seems like simple PR, helping to sell monetary policy to a very skeptical public during turbulent times. But Daniel Indiviglio over at the Atlantic has an interesting take on Bernanke's sudden jump into the spotlight:
I worry that he has an ulterior motive. He may be responding to Congress' efforts, led by Ron Paul, to attempt to bring greater transparency to the Fed. Bernanke may be trying to quell public anger at the Fed's opaque nature so that it can retain secretive tactics and not really have to answer to anyone. He could be attempting to make nice so voters call off their dogs and let the Fed function as it always has.
There could be one other reason for Bernanke's sudden jump into the limelight, Indiviglio writes: his term is nearly up, and it'll be President Obama's choice whether to reappoint him. The Obama Administration has been all about reaching out directly to the public in their PR efforts -- Indiviglio says Bernanke could just be going with the team to impress his boss so he can keep his job.
Elizabeth Warren, chair of the Congressional Oversight Panel, has been defending the creation of a Consumer Financial Protection Agency a lot lately. Yesterday, she released a YouTube video (above) outlining her arguments for why we need one. Today, she addresses what she calls myths about the agency on Baseline Scenario. She writes:
The CFPA will not limit consumer choice. Instead, it will focus on putting consumers in a position to make choices for themselves by streamlining regulations, making disclosures smarter, and making financial products easier to understand and compare. The Agency will promote plain vanilla contracts--short, easy to read mortgages and credit card agreements. The key principle behind the new agency is that disclosure that runs on for pages is not real disclosure--it's just a way to hide more tricks. Real disclosure means that a lender has to be able to explain what it is selling so that the customer can read it and understand it. Once consumers can understand the risk and costs of various products -- and can compare those products quickly and cheaply -- the market will innovate around their preferences.
Sergey Aleynikov has been called the dumbest man at Goldman Sachs. Aleynikov was arrested last week on charges that he stole proprietary trading software from Goldman Sachs, which was in no mood for that -- even if it is on the verge of announcing eye-popping profits.
For an investment firm, much of the game is in convincing people that its traders know something the rest of the world doesn't. That secret sauce, often enough, may actually be trading software made by a programmer toiling away on Wall Street. In March, Michael Osinski wrote an article in New York magazine confessing that he'd blown up Wall Street. How? "I wrote the software that turned mortgages into bonds." (Update: Jonathan Weil's "Goldman Sachs Loses Grip on Its Doomsday Machine.")
Now comes the story of Aleynikov, the Goldman Sachs programmer who's free on a $750,000 bond. The FBI says he has begun explaining the actions that got him in trouble. I asked a few developer types in our Twitter crowd to see whether the accounts sounded plausible to them and why someone might make such a "career-limiting move," as geekosaur put it.
Former Federal Reserve Chairman Alan Greenspan weighs in on the current state of the economy in the Financial Times. Here's some of what he has to say:
The US is faced with the choice of either paring back its budget deficits and monetary base as soon as the current risks of deflation dissipate, or setting the stage for a potential upsurge in inflation. Even absent the inflation threat, there is another potential danger inherent in current US fiscal policy: a major increase in the funding of the US economy through public sector debt. Such a course for fiscal policy is a recipe for the political allocation of capital and an undermining of the process of "creative destruction" -- the private sector market competition that is essential to rising standards of living. This paradigm's reputation has been badly tarnished by recent events. Improvements in financial regulation and supervision, especially in areas of capital adequacy, are necessary. However, for the best chance for worldwide economic growth we must continue to rely on private market forces to allocate capital and other resources. The alternative of political allocation of resources has been tried; and it failed.
Former Chrysler CEO Lee Iacocca spoke to the Associated Press today and offered some advice to America's struggling car companies. Iacocca who helped rescue Chrysler in the 1980's with $1 billion in government loan guarantees, said the companies should pay back their loans as soon as possible. The AP reports:
''They're on you day and night. Their oversight is just too extreme,'' said Iacocca, who is promoting a new limited-edition customized Iacocca Ford Mustang. ''That's why our 10-year loan, we paid it back in three years. We couldn't stand the government. The bureaucracy kills you.''
This week the Dow Jones Industrial Average dropped General Motors and Citigroup from its index. The Dow Jones Industrial Average uses the stock prices of 30 companies to gauge the health of America's industrial sector.
GM was replaced by Cisco Systems. Citi's spot went to Travelers Companies. Which is ironic, seeing as Citi used to own Travelers. In fact, Citi got its corporate identity from Travelers -- the red umbrella (check out a cool video about Citi's designer Paula Scher). Two years ago, they split and Citigroup sold the red umbrella logo back to Travelers.
Or maybe he marks himself to model. I'm not sure what you'd call this:
"My net worth fluctuates, and it goes up and down with markets and with attitudes and with feelings, even my own feeling," [Donald Trump] told lawyers in the December 2007 deposition.
That's from a Wall Street Journal dispatch on Trump's suit over defamation. The real estate mogul claims he was libeled in 2005 when an author put his net worth at between $150 and $200 million instead of the billions he claims to be worth.
However Trump counts up his fortune, he's itching for damages in large nominal terms. He predicted in an interview with the Journal that "the publishing company will pay me hundreds of millions of dollars." The paper says that the author, Timothy O'Brien, declined to comment on the ongoing court case.
Bank of America's shareholders voted yesterday to remove Ken Lewis as chairman of the bank's board. According to reports, Lewis spent much of the four-hour meeting fighting to convince shareholders he is still capable of leading the bank and arguing that acquiring Merrill Lynch was the right thing to do. Lewis remains CEO for now, but many analysts say it's only a matter of time. Here is the take from John Gapper over at the Financial Times:
The omens are not propitious. When Michael Eisner gave up the chairmanship of Walt Disney in 2004 following a 43 per cent vote by shareholders against his re-election to the company board, he insisted he would stay on as chief executive until 2006. In fact, he left the company in 2005.
Ken Thompson of Wachovia did not last that long after the board gave the chairmanship of the bank to Lanty Smith a year ago. As John Carney notes, he departed as chief executive a month later.
Who took out GM CEO Rick Wagoner? Detroit Free Press columnist Tom Walsh says he knows. He writes, "Simple math cost Wagoner his job:"
[U]ltimately, when GM's survival was on the line and the Big Banker himself, President Barack Obama, had to decide whether to keep federal loans flowing to GM, the Big Banker didn't find Wagoner's track record reassuring enough.
Walsh says GM has lost $82 billion in the last five years.
Amid the news from Detroit this morning, comes word that President Obama has appointed Edward Montgomery, an economist and former Labor Department deputy secretary, to the position of Director of Recovery for Auto Communities and Workers. His job will be to help autoworkers, communities and regions adversely impacted by the failure of the automakers find new jobs, businesses and industries. Sounds like a tough gig. Anyone have any suggestions?
The Treasury Department has released new details about its plans for regulation of the financial system. The framework for reform includes creating a single regulator to manage system risk, increasing capital and risk management requirements for systemically important firms, requiring hedge funds above a certain size to register and regulation and oversight of the derivatives market.
The talk of establishing a systemic risk regulator to oversee all financial institutions has gained increased attention in recent weeks, as Congress has focused on the government's involvement in AIG. The Treasury Department says it wants to give "a single entity the ability to supervise, examine, and set prudential requirements for these critical parts of our financial system."
Treasury Secretary Timothy Geithner won't be on Planet Money this afternoon, but he did make an appearance over on CNBC. Here's a bit of what he said:
BURNETT: And the question is, are things a lot worse than we think with the banks, that--or are they, need to take the training wheels off and stop freeloading off the taxpayer?
Sec. GEITHNER: I think you're going to see people start to raise equity again. I think they will.
BURNETT: Soon?
Sec. GEITHNER: Not sure how soon, but I think that'll happen. Again, by helping get these markets for real estate...(unintelligible)...loans going again, if you're helping provide financing to get the securities markets going again, you're going to make it more likely that these guys
are able to clean up their balance sheets and raise private equity again. I--it'll come.
In an op-ed in today's Washington Post, AIG CEO Edward Liddy says he shares the public's anger towards his company and other financial firms. Here's a taste:
I am mindful of the outrage of the American public and of the president's call for a more restrained compensation system. I am also mindful that every decision we make at AIG has consequences for the American taxpayer. We weigh decisions with one priority in mind: Will this action help or hurt our ability to pay money back to the government?
Although we have wound down more than $1 trillion in the portfolio of the AIG Financial Products unit that is at the root of the company's troubles, there remains substantial risk in that portfolio. The financial downside for taxpayers is potentially very large, and that's why we're winding down this business.
Harry Markopolos spent nearly 10 years trying to warn the world about Bernie Madoff. Markopolos, working for a private investment firm, tried to figure out the math on Madoff's investments. When he failed, Markopolos began sending tips to the Securities and Exchange Commission.
How's he feeling now that Madoff is behind bars? Not so great, he told the folks at the Bottom Line, a blog out of Boston's WBUR.
The New Republic's Noam Scheiber has written an extensive profile of Larry Summers, Director of the National Economic Council, and one of Obama's key advisors. The wide-ranging piece covers Summers from his college debate team days through his work on the current stimulus bill. Here is the bit that grabbed me:
In July, when he was still a civilian, Summers argued in the Financial Times that the government should use its "receivership power" over Fannie Mae and Freddie Mac to wipe out holders of regular and preferred stock and certain types of bonds, "conserving cash for the benefit of taxpayers." He said it should run the companies until the financial crisis passed--perhaps a period of several years--before selling off certain components to the private sector. "It is a time for decisive action," Summers wrote.
James Kwak, our friend at Baseline Scenario, considered our quest for people to blame in the economic crisis. Kwak writes:
If I had to pick one person or institution, there is only one possibility: [Former Federal Reserve chairman] Alan Greenspan.
Obviously a crisis of the current magnitude requires the participation of many people and institutions. But if you are looking to place blame, you need to focus on people who could have made a difference. Blaming things on "greed" or "greedy people" is silly, because as someone once said, greed is like gravity: you know it exists, and you have to expect to be there. Blaming individual rating agencies, mortgage lenders, investment banks, bank CEOs, etc. also doesn't work. In each case, if that agency/lender/bank/CEO had behaved differently, it would have made no difference. In a competitive market, it would have simply lost market share and been replaced by a less scrupulous competitor (or, in the case of a CEO, he would have been fired).
Greenspan is different, and uniquely important, for a couple of reasons.
We're starting to hear this all over, from people in direct contact with him and from the press: Treasury Secretary Tim Geithner is starting to fry. And really, what mortal in his position wouldn't?
The New York Times today notes that Treasury is having trouble hiring enough people fast enough. One hint we've been getting is that any number of candidates have been disqualified for personal tax trouble. The Times reports:
[A]lmost all the top posts beneath Mr. Geithner are still vacant. Though he has hired about 50 senior advisers -- about half the number he hopes to recruit -- the White House has become so worried about potential tax problems and other issues in the backgrounds of candidates that it has nominated only a handful of people.
President Barack Obama told reporters yesterday that stocks are starting to look enticing again:
"[W]hat you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is potentially a good deal, if you have a long-term perspective on it."
The Wall Street Journal has the best take I've seen on why sitting presidents usually steer clear of talking about the Dow:
Andrew Sullivan goes eight flavors of nope on U.S. Treasury boss Tim Geithner, who's still working out the details of the public-private partnership to save banks:
I'm a pretty sympathetic Obama supporter. I'd like to know what the Treasury secretary actually proposes with respect to the banking crisis. Is that really too much to ask? Maybe he'll tell us today. Who knows? He should be a critical force in explaining the government's economic policies, and yet he seems incapable of conveying anything to the American public whom he serves. He came across in his debut as a terrified intern who hadn't mastered his brief. And his political presence since has been pathetic.
"Sometimes, people seem to be relieved to get off the treadmill and to be given an opportunity to reconsider what they really want out of life. One of the great implications of this turbulence for us is to re-boot our sense of what a truly flourishing human life consists of. The 'CrackBerry' culture is dangerously addictive and switching off from it is notoriously difficult."
For me, layoffs have always involved a least a measure of despair/panic. Maybe it's different in places where people don't have to worry so much about health insurance.
Internet billionaire and Dallas Mavericks owner Mark Cuban has his own plan to stimulate the U.S. economy, and he's looking to entrepreneurs for help. Here's the pitch from his blog:
You must post your business plan here on my blog where I expect other people can and will comment on it. I also expect that other people will steal the idea and use it elsewhere. That is the idea. Call this an open source funding environment.
If its a good idea and worth funding, we want it replicated elsewhere. The idea is not just to help you, but to figure out how to help the economy through hard work and ingenuity. If you come up with the idea and get funding, you have a head start. If you execute better than others, you could possibly make money at it. As you will see from the rules below, these are going to be businesses that are mostly driven by sweat equity.
Whatever you want to say about those Austrian School economists from George Mason University, they're not afraid to bite. Here's the latest from Don Boudreaux, who talked Planet Money through the plus side of layoffs. Today, he's on about President Obama's move to limit executive pay:
[T]he most egregious problem with this salary cap . . . is that it sets a frightening precedent. Government is now increasingly in the business of determining salaries and deciding whether firms can have private jets. These matters -- salaries and jets -- are lightning rods for public attention. So they are, ipso facto, lightning rods for politicians' attention.
You can bet your grandchildren's share of the national debt, however, that other corporate matters will become lightning rods of attention -- and, hence, objects of self-righteously imposed government restrictions.
Is Bank of America spending oodles of money on advertising? Horrors! Make it stop. Is General Motors planning to install machinery that will displace some workers? Never! Make it stop. Is Chrysler appointing yet another middle-aged straight white male as its president? Racist homophobic chauvinists! Make them appoint a handicapped lesbian of color.
I am still shocked at how many people have been so angry at me and Alex for our biography of Keynes.
Look: the guy is a complicated and, sometimes, difficult personality. He had some disgusting views. To me, it's obvious that that is worth commenting on. It doesn't automatically disqualify his theories. But it's not irrelevant.
Anyway, many have asked us what they should read to judge the man themselves.
The only choice (as far as I know) is Robert Skidelsky's excellent, lovely, totally readable biography of Keynes.
I think the abridged version (at a hefty 1000+ pages) is fine. No need to read the full 3-volumes unless you really, really want to.
I'd be eager to hear what other people think of the man. The book made me dislike Keynes more than I expected I would. Too snobby, narrow-minded, elitist. Although he was clearly charming at times and brilliant. Others tell me they love the man portrayed in the book.
Since we're podcasting today about ex-Merrill Lynch CEO John Thain, NPR's David Folkenflik sends this sneak peek at his regular column:
As we segue from the golden age of Bashing the Media to the golden age of Eulogizing the Media, I'd like to pause for a moment to admire an example of a journalist doing her job. As I lack expertise in certain elements of high finance, I'll be appealing at the end of this to professionals to weigh in -- but the professionals I'm talking about may be different than the ones you'd expect.
On Monday, a humbled Wall Street titan entered the court of public opinion to try to salvage his reputation.
My dad's an actor. And he taught me that when actors play a villain or a jerk, they have to find a way to sympathetically understand that person. After all, villains and jerks don't think of themselves as villains and jerks. They generally think they are decent people responding to an unfair world, or whatever other justification they have. When an actor doesn't do the work of finding some way to sympathetically embody a bad character, you can tell: they play it as a crude caricature.
So, I've had a lifelong habit of trying to sympathetically understand villains and jerks. This is helpful for a journalist (particularly, for me, when covering the Middle East), though it can make your head hurt sometimes. And John Thain--probably more of a jerk than a villain--is really putting me through my paces.
Where is the soul-searching? Where is the self-doubt? Where is the slightest hint that this guy understands this moment in history?
Tomorrow, I'll be in Philadelphia at the Wharton Private Equity Conference. I'd like to invite you to post or e-mail questions or issues you would like me to cover while I'm there. If you're wondering what private equity is, click on the jump.
While Goldman Sachs, Morgan Stanley and Merrill Lynch, among others, have eliminated their CEOs' bonuses and cut the cash paid out to their senior-most executives, Credit Suisse has come up with an interesting third option on the bonus-or-no-bonus question: it created a pool of its worst-performing loans, the Partner Asset Facility, from which it will pay its top two ranks of managers.
Our friend David Martin started an interesting thread on his Facebook group asking people who they would nominate to be Obama's Treasury Secretary. We thought it was such a great idea that we wanted to hear more. So tell us, which man or woman do you think deserves the job and why?
I just love the Internet democracy that is You Tube. The latest example is the recording currently online of part of the conference call between Neel Kashkari -- the Treasury official named this week to run the new bailout program -- to 800 financial-industry big whigs.
The call took place the night before the House rejected the rescue plan, which passed later in the week.
Adam says you shouldn't listen to Jim Cramer, who told the world this week that it was time to take money out of the market. As you can see in the clip above, Cramer's still on it. The celebrity analyst has been accused of adding fuel to the panic. "Only in a jittery time would someone who says ' be safe and sorry' be pilloried," he says. "I think I'm irresponsible if I tell you everything will be fine."
A couple of reactions from the wide world to Sen. John McCain's mortgage rescue plan. At Tuesday night's debate, the GOP presidential nominee unveiled a proposal to have the Treasury buy up bad mortgages from individual consumers in an effort to help them stay in their homes. The government would renegotiate people's payments based on the true (lower) value of the property.
Stop right there, says the Sundries Shack. "The value of housing fluctuates with the demand for housing," the site says. "The government is hideously bad in picking the value of anything."
The great big Wall Street bailout now has a boss, and guess where they found him? Neel Kashkari works with Treasury Secretary Henry Paulson now, as assistant secretary for International Economics and Development. Kashkari, 35, came to the Treasury through the same route as Paulson, which is to say through Goldman Sachs.
He'll oversee the Troubled Assets Relief Program and the Office of Financial Stability.
Paulson likes to surround himself with people he's comfortable with: people, mostly, from Goldman Sachs. Paulson's inner circle already includes former Goldmanites Dan Jester, a financial institutions banker, and retired banker Steve Shafran, who focused on corporate restructuring at Goldman. It also included Robert Steel, who has since left Treasury to become CEO of Wachovia.
I just heard a commentator on TV in the next cube over railing about Richard Fuld's testimony to the House Committee on Oversight and Government Reform today. Fuld was the CEO of Lehman Brothers. Fuld told Congress he takes "full responsibility for the decisions taht I made and for the actions that I took, based on the information that we had at the time."
Yeah, whatever. Rep. Elijah Cummings of Maryland wondered "how he sleeps at night." Rep. Henry Waxman of California whacked Fuld around for making hundreds of millions at Lehman but claiming he and the others at Lehman were overwhelmed by circumstances. Fuld may not have helped himself with bits like this, from his prepared testimony:
The first authorized biography of master investor Warren Buffett, who swooped in with $5 billion for a sizable chunk of Goldman Sachs early this week, is due out Monday. Even if only Wall Streeters who got laid off this week buy the book, it'll be a blockbuster.
"The Snowball: Warren Buffett and the Business of Life," is written by Alice Schroeder, a former Morgan Stanley insurance analyst, who said she spent 2,000 hours with Buffett, amassing 300 hours of recorded interviews, over five years.
One suprise, she says, is what the man was like behind the gold-plated mask:
