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Archive for May, 2009

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  • For more than two decades, Bernard Madoff’s secretary sat just outside his office. She knew his clients and his feeders, his moods, habits, and indiscretions. She saw both sides of his wife, Ruth. Until December 11, 2008, she trusted him as a generous, caring boss. Now, in an exclusive collaboration with Mark Seal, Eleanor Squillari describes the madness surrounding Madoff’s arrest—meticulously planned, she believes, by him—her role in helping the feds, and the mysteries of the 17th floor, two levels down, where his massive Ponzi scheme was perpetrated.

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  • From this aspect, therefore, the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.
  • The critical weakness in our system is that bank executives get to keep their jobs and their money. All key insiders should be fired when their banks become insolvent (as part of the government intervention and support process), irrespective of the reason for that insolvency. They should also be subject to large fines, equal to or in excess of the value of their total compensation while leading the bank that failed. As things currently stand, powerful insiders have learnt that they can gamble heavily and never lose personally or professionally.
  • This is why the government needs to develop a credible process for allowing and managing a bank’s failure. Right now, the banks are like that gambler. They’ve lost just about everything. But since the government won’t let them actually lose everything, they have an incentive to make big bets. To repay the TARP too early and try and trick the market into thinking them healthy. The only thing they have left to fear is failure. But we’ve taken failure off the table. So what do they have left to fear?
  • The CEOs of too many public companies enjoy the power and rewards of ownership without the risks. Corporate values have deteriorated as a result
  • Steve Jobs, Apple’s ailing CEO, is scheduled to return to work this month after a six-month leave, but investors are feeling skittish. Every time he sneezes, shares of Apple catch a cold. Can a CEO—even one as talented and visionary as Jobs—really make or break a corporation? Many business scholars have grown skeptical of the idea of chief executive as superhero. Cutting-edge research reveals that while some CEOs clearly do make a big difference, many are merely the most visible cogs in complex machines.
  • Plainly, Steele’s biggest hurdle has been his inability to figure out his place in the universe. He is no longer a spokesman for the party; he’s the spokesman for the party, and that responsibility carries with it a series of internal checks on what he should say. And despite intense counseling from his aides, Steele is the type of guy who warms to his audience and then goes white-hot, telling people in front of them what he thinks they want to hear. It’s a great quality for a back-slapping CEO, but it’s a potentially fatal fault for a guy in charge of a party that hasn’t figured out what its core problem is.
  • For a long time now, consumption has been the primary engine of growth, but for many reasons that is likely to change (perhaps most importantly, it looks like long-term saving trends may begin to reassert themselves). Japan pulled itself out of its lost decade through an export boom, but that’s not exactly something to which America is well suited at the moment. It’s not clear what products would be exported to which markets in volumes sufficient to deliver steady, high growth. Government can’t deliver steady growth on a long-term basis. Housing investment, as noted, is going nowhere. Non-residential investment is actually in worse shape than residential investment at the moment, since it’s more of a lagging indicator.
  • What I’d like, as most of you know, is a series of substantial increases in the gas tax, to begin taking effect in 2011. This would have the same effect on vehicle fleets, more or less, as mileage standards. It would also encourage people to drive less, and it would reduce emissions among drivers who choose to purchase used vehicles, and it would provide revenues to build cleaner transportation infrastructure, and it would encourage consumers to continue substituting away from petroleum, reducing the economic impact of any future oil spike.

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