Greenspan: Inflation Is The Real Threat

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.

Caitlin Kenney

11:04 AM ET | 06-26-2009 | permalink

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Lee Iacocca Has Some Advice

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.''

Continue reading "Lee Iacocca Has Some Advice" »

Caitlin Kenney

2:31 PM ET | 06-22-2009 | permalink

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Dow Jones Sheds More Metal

Click to enlarge. Lincoln Ritter

 

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.

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Chana Joffe-Walt

12:30 PM ET | 06- 5-2009 | permalink

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Trump Marks Self To Market

A man on the move. Michael Loccisano/Getty Images

 

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.

Laura Conaway

11:52 AM ET | 05-18-2009 | permalink

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Ken Lewis, Chairman No More

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.

Continue reading "Ken Lewis, Chairman No More " »

Caitlin Kenney

12:34 PM ET | 04-30-2009 | permalink

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Wagoner Rolls Home

No mystery man. Roger L. Wollenberg/Getty Images

 

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.

Laura Conaway

2:32 PM ET | 03-30-2009 | permalink

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The Future Of Detroit

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?

Caitlin Kenney

10:30 AM ET | 03-30-2009 | permalink

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Wanted: Systemic Risk Regulator

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."

Continue reading "Wanted: Systemic Risk Regulator" »

Caitlin Kenney

12:52 PM ET | 03-26-2009 | permalink

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Geithner On CNBC

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.

Watch video of the interview after the jump.

Continue reading "Geithner On CNBC" »

Caitlin Kenney

3:09 PM ET | 03-23-2009 | permalink

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Liddy Speaks Out

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.

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Caitlin Kenney

12:30 PM ET | 03-18-2009 | permalink

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After Madoff: Still Not Sleeping

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.

Laura Conaway

4:23 PM ET | 03-16-2009 | permalink

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Getting To Know Larry Summers

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.

Continue reading "Getting To Know Larry Summers " »

Caitlin Kenney

3:35 PM ET | 03-16-2009 | permalink

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He Blames Greenspan

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.

Continue reading "He Blames Greenspan" »

Laura Conaway

9:55 AM ET | 03-16-2009 | permalink

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Tim Geithner Needs A Nap

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.

Continue reading "Tim Geithner Needs A Nap" »

Laura Conaway

10:23 AM ET | 03- 9-2009 | permalink

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Obama: President, Stock Broker

The Recovery and Reinvestment Act logo Critiqued by Notes from Notchcode

 

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:

Continue reading "Obama: President, Stock Broker" »

Laura Conaway

9:57 AM ET | 03- 4-2009 | permalink

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Geithner As 'Terrified Intern'

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.

Laura Conaway

11:50 AM ET | 03- 3-2009 | permalink

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Quote Of The Day

The Right Rev. Richard Chartres, Bishop of London, on why layoffs can be good for us:

"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.

Laura Conaway

10:29 AM ET | 02-12-2009 | permalink

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The Mark Cuban Stimulus Plan

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.

Continue reading "The Mark Cuban Stimulus Plan " »

Caitlin Kenney

3:57 PM ET | 02-11-2009 | permalink

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Don't Hold Back Now

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.

Laura Conaway

12:00 PM ET | 02-11-2009 | permalink

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Keynes Biography

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.

What do you think?

Adam Davidson

2:44 PM ET | 02- 5-2009 | permalink

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What's John Thain Saying?

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.

Continue reading "What's John Thain Saying?" »

Laura Conaway

3:45 PM ET | 01-28-2009 | permalink

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Thoughts On Thain

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?

Continue reading "Thoughts On Thain" »

Adam Davidson

8:02 AM ET | 01-26-2009 | permalink

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Got A Question For The 'Masters of the Universe'?

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.

Continue reading "Got A Question For The 'Masters of the Universe'?" »

Alan Cordova

11:51 AM ET | 01-22-2009 | permalink

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Now In Irony Quotes: 'Bonus'

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.

Continue reading "Now In Irony Quotes: 'Bonus'" »

Alan Cordova

12:27 PM ET | 12-19-2008 | permalink

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Wearing The Crisis On Your Sleeve

As Dealbreaker noted today, Bernie Madoff merchandise is up for auction on eBay, joining Bear Stearns, Lehman Brothers and Merrill Lynch tchochke, as well as a fugitive fund manager's business card in the ranks of credit crisis collectibles.

The Madoff item is a vest, made of fleece. We'll leave the punchline to you.

Alan Cordova

1:36 PM ET | 12-16-2008 | permalink

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Private Equity To The Rescue?

The Office of the Comptroller of the Currency decided for the first time on Friday to allow private equity firms to bid on failing banks, just as three of were closed down by the FDIC.

The first charter recipient is Hilltop Holdings, led by the other Gerald Ford.

Continue reading "Private Equity To The Rescue?" »

Alan Cordova

4:41 PM ET | 11-24-2008 | permalink

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You Decide: New Treasury Secretary

Who should it be?

iStockphoto.com

 

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?

Caitlin Kenney

11:22 AM ET | 11- 7-2008 | permalink

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Let's All Take A Listen

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.

It's a good listen.

Daniel Costello

5:13 PM ET | 10-10-2008 | permalink

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Cramer's Not Sorry

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."

Laura Conaway

1:36 PM ET | 10- 8-2008 | permalink

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McCain's Mortgage Plan

And a chicken in every pot.

Jim Watson/AFP/Getty Images

 

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."

CNN Money takes a newsier approach, but the headline's not friendly: "McCain mortgage plan shifts costs to taxpayers."

Laura Conaway

1:15 PM ET | 10- 8-2008 | permalink

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Meet The Bailout Boss

The $700 billion man.

Chris Taylor, U.S. Treasury Department/AP Photo

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.

The Wall Street Journal runs down his curriculum vitae, with this note about Paulson:

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.

Laura Conaway

2:46 PM ET | 10- 6-2008 | permalink

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Congress Spanks Lehman CEO

Richard Fuld of Lehman Brothers

Mandel Ngan/AFP/Getty Images

 

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:

Continue reading "Congress Spanks Lehman CEO" »

Laura Conaway

1:31 PM ET | 10- 6-2008 | permalink

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Paulson's Cool Head

On Monday, the House spiked his bailout bill.

Saul Loeb/AFP Photo/Getty Images

 

Our colleague Yuki Noguchi files a piece in which a friend of Treasury Secretary Henry Paulson calls him good under pressure. We're glad to hear it.

Laura Conaway

11:48 AM ET | 10- 1-2008 | permalink

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Can The Man Do Anything Wrong?

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:

Continue reading "Can The Man Do Anything Wrong?" »

Daniel Costello

4:10 PM ET | 09-26-2008 | permalink

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