Inside the crisis at AIG Fortune: An interview with their general counsel who left because of compensation rules at AIG. She would not be able to get severance pay/golden parachutes if she got into the top 10 highest paid at AIG.
Fears of mass UK banking exodus prove unfounded Guardian: “Numbers of people applying for jobs in Swiss financial sector last year actually fell, despite warnings by Boris Johnson that new taxes would drive them away”.. “If you are in a global economy, a national supervisory regime cannot be enough, so you’ve got to look at the rules under which financial institutions operate globally. One of those rules is that the banks… make a proper contribution to society,” said Brown. And what is so wrong with that?
Shock as British deficit equals that of Greece Independent: “It is clear that a more credible plan to restore the public finances to health will be required shortly after the general election in order to keep the markets and rating agencies at bay.”
Our economic and financial model of the last 30 years, that of a high degree of international trade and robust cross border capital flows, may be inherently unstable. There are three factors that suggest why.
The first is empirical: large cross border capital flows are associated with bigger and more frequent financial crises. Correlation is admittedly not causation, but that conclusion emerges resoundingly from Carmen Reinhart and Kenneth Rogoff’s work on financial crises. Similarly, the post war period through the mid-1970s, which was notably free of major incidents, was one of capital controls and less trade than now.
The second is that we have a defect in our current currency arrangements, similar to one that plagued the gold standard. Countries that run sustained trade deficits are punished via deflationary adjustments. But there are no mechanisms from discouraging countries from running sustained surpluses, particularly by pegging their currencies too cheaply. France accumulated large gold reserves in the runup to the Great Depression in just this fashion, as China and the Asian tigers have accumulated large foreign exchange reserves in our day. While it is easy to blame the profligate borrower, it takes two to tango.
The third is that it may prove impossible to have an effective international regulation for capital markets firms. As a second Financial Times piece, on Obama’s plans to increase capital ratios, indicates, some of the measures the US would like to implement do not sit well with European banks:”
In the week ending Feb. 13, the advance figure for seasonally adjusted initial claims was 473,000, an increase of 31,000 from the previous week’s revised figure of 442,000. The 4-week moving average was 467,500, a decrease of 1,500 from the previous week’s revised average of 469,000.
The jobless claims series is the best real time dataset we have – and right now it is pointing to a weak and halting recovery. There are still 5.5 million people on the unemployment roles (4.6 using the seasonally-adjusted data). However, there are a record 5.8 million people collecting extended unemployment benefits as well. So, this brings us to a record 11.3 million people collecting some sort of unemployment insurance benefit in the United States.
“The most distressing difference however is the last line – EUC 2008. This is the number of individuals on extended benefits – and that number has trebled since the depths of the recession. Translation: long-term unemployment rates have skyrocketed. And since long-term unemployment equals loss of skills and employability, we are looking at statistics that will translate into a human tragedy for many Americans if and when the employment picture brightens.”
The Future of Public Debt Big Picture: “From the BIS, a paper on the future of public debt, some lucid and helpful musings on the entitlement mess on the other side of the current sovereign debt explosion in OECD countries: The Future of Public Debt”. Public debt is unwieldy and growing, bad for business.
Administration to provide more aid to homeowners Washington Post: “President Obama will announce a plan Friday to direct $1.5 billion in taxpayer money to five state housing finance agencies to help them develop new programs for addressing the housing crisis in their communities, according to a senior administration official.
The five states — California, Nevada, Arizona, Michigan and Florida — have been among the hardest hit by the housing crisis and have seen home values decline more than 20 percent. The initiative will be financed through the government’s Troubled Assets Relief Program (TARP).
Obama is scheduled to make the announcement in Nevada on Friday morning alongside Senate Majority Leader Harry M. Reid (D-Nev.), who faces a tough reelection battle this year.”