Impressions for 2009-05-31

• The Importance of Compensation « The Baseline Scenario
  In my opinion, one of the biggest contributors to the crisis we know so well was compensation schemes that gave individuals at financial institutions – from junior traders all the way up to CEOs – the incentive to take massive bets. Put people in a situation where the individually rational thing to do is take lots of risk, and they will take lots of risk – especially if they are generally ambitious, money-loving, and predisposed to think that if the market is giving it to them, they must deserve it.
  (tags: banking finance compensation risk reward disney lessons crisis incentives economics simon_johnson management)
• Crazy Compensation and the Crisis – WSJ.com
  Whoever dreamed up this crazy compensation system? That's a good question, and the answer leads straight to the doors of the top executives of the companies. So let's consider the incentives facing the CEO and other top executives of a large bank or investment bank (but, as I'll explain, not a hedge fund). For them, it's often: Heads, you become richer than Croesus ever imagined; tails, you receive a golden parachute that still leaves you richer than Croesus. So they want to flip those big coins, too.
  (tags: finance economics wsj compensation hedge_funds banking bonus incentives risk shareholder management crisis wall_street)

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Impressions for 2009-05-29

• State of Paralysis- Paul Krugman
  California, it has long been claimed, is where the future happens first. But is that still true? If it is, God help America.
  (tags: california politics krugman economics republican crisis budget incompetence greed bubble real_estate taxes schwarzenegger debt state)
• He's Not Just a Bear — He's a Grizzly
  The villains in Shiller's account have emerged as new Ponzis. Unlike the original improper Bostonian, Charles, the new Ponzis do not practice fraud. Rather, he says, they promote the belief that it is always safe to buy stocks, not because of any intrinsic value they might have, or, God forbid, because of the dividends they may pay, but because they can always be sold to someone else at a higher price. This is a potent message in a country where stock ownership is expanding to the point where it now involves a majority of American families.
  (tags: shiller markets investment ponzi greed book review prediction crash boom economics speculation history)

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Impressions for 2009-05-28

• The Madoff Chronicles, Part II: What the Secretary Saw – Vanity Fair
  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.
  (tags: finance madoff fraud ponzi investment secretary fbi wall_street)

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Impressions for 2009-05-27

• Andrew Bacevich: America and War – On Point with Tom Ashbrook
  Memorial Day is a day to honor service and sacrifice.

  It is also a day, in the so-called “Long War” years that have followed what was called the “War on Terror” — with American troops still deeply deployed in Iraq and Afghanistan — for all Americans to think about what we’re doing, what we’re asking, what we’re fighting for.

  Onetime soldier, now scholar, Andrew Bacevich knows service — his own in Vietnam and the Persian Gulf War. He knows sacrifice — his soldier son’s life in Iraq. And he is asking the biggest questions.

  (tags: bacevich war usa responsibility bush obama military foreign_policy history npr radio interview recommended lifestyle energy oil afghanistan politics)

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Impressions for 2009-05-26

• Redux: 'Joker One': A Marine's Memoir Of Iraq War : Fresh Air
  Former Marine Donovan Campbell served three combat deployments, two in Iraq and one in Afghanistan. He commanded Joker One, a platoon of new Marines that he trained and transformed into a fighting unit. In Iraq, they were assigned to Ramadi, the capital of the Sunni-dominated Anbar province. For seven months, they engaged in daily house-to-house combat with insurgents. Nearly half of his platoon had been wounded. Campbell was awarded a Bronze Star with Valor for his time in Iraq. Campbell now is working for PepsiCo and living in Dallas, Texas with his wife and daughter.
  (tags: donovan_campbell iraq afghanistan war marines combat leadership recommended interview npr honor values responsibility insurgents sacrifice memoir)

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Impression for 2009-05-25

• The Benefits of Distraction and Overstimulation — New York Magazine
  Are we living through a crisis of attention?

  Before I even have a chance to apologize, Meyer responds with the air of an Old Testament prophet. “Yes,” he says. “And I think it’s going to get a lot worse than people expect.” He sees our distraction as a full-blown epidemic—a cognitive plague that has the potential to wipe out an entire generation of focused and productive thought. He compares it, in fact, to smoking. “People aren’t aware what’s happening to their mental processes,” he says, “in the same way that people years ago couldn’t look into their lungs and see the residual deposits.”

  (tags: attention internet twitter society multitasking distraction psychology brain thought productivity recommended)

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Impression for 2009-05-22

• Economics in One Lesson – Henry Hazlitt
  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.
  (tags: economics books government taxes money trade price demand consumption business production capitalism markets to_read)
• Consumer Protection When All Else Fails (Written Testimony) « The Baseline Scenario
  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.
  (tags: responsibility accountability risk bailout tarp banking finance moral_hazard government regulation incentives greed recession simon_johnson)
• How the Government Has Made the Banks Into Gamblers – Ezra Klein
  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?
  (tags: banking tarp bailout crisis incentives risk gambling moral_hazard government)
• Executive Privilege – Clive Crook
  The CEOs of too many public companies enjoy the power and rewards of ownership without the risks. Corporate values have deteriorated as a result
  (tags: ceo management investment risk accountability morality to_read)
• Do CEOs Matter? – The Atlantic
  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.
  (tags: ceo business management investment apple steve_jobs to_read)
• Steele Tries The Reset Button – Marc Ambinder
  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.
  (tags: steele gop rnc conservative politics ambinder speech media incompetence partisanship accountability)
• The Bellows » What Next?
  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.
  (tags: future growth ryan_avent economics consumption housing usa investment bubble crisis trade jobs)
• The Bellows » Standards
  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.
  (tags: standards carbon emissions gas oil tax vehicle policy efficiency climate economics incentives ryan_avent environment)

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Impression for 2009-05-21

• Did White House OK Earliest Detainee Abuse? : NPR
  “I can’t believe the CIA would have settled for a piece of paper from the counsel to the president,” says one former government official familiar with those discussions.

  “If that were true,” says the former official, “then the whole legal and policy review process from April through August would have been a complete charade.”

  (tags: torture interrogation detainees zubaydah cia white_house government war_crimes accountability guantanamo secrecy npr)

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Dogs Understand Fairness, Get Jealous

In one sense, this new study is not surprising to anyone who has spent any time around dogs. Humans and dogs (and some other animals, but especially dogs) share many of the basic building blocks of emotions at a mammalian, neurological level.

On the other hand, it is still remarkable just how advanced the perception of canine fairness can appear:

Dogs have an intuitive understanding of fair play and become resentful if they feel that another dog is getting a better deal, a new study has found.

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Impression for 2009-05-18

• Norway Thrives by Going Against the Tide – NYTimes.com
  With a quirky contrariness as deeply etched in the national character as the fjords carved into its rugged landscape, Norway has thrived by going its own way. When others splurged, it saved. When others sought to limit the role of government, Norway strengthened its cradle-to-grave welfare state.

  And in the midst of the worst global downturn since the Depression, Norway’s economy grew last year by just under 3 percent. The government enjoys a budget surplus of 11 percent and its ledger is entirely free of debt.

  By comparison, the United States is expected to chalk up a fiscal deficit this year equal to 12.9 percent of its gross domestic product and push its total debt to $11 trillion, or 65 percent of the size of its economy.

  (tags: norway scandinavia growth gdp policy society government finance debt thrift lessons economics wealth regulation)
• My Personal Credit Crisis – Edmund Andrews
  As I walked out of the settlement office with my loan papers, I couldn’t shake the sense of having just done something bad . . . but also kind of cool. I had just come up with almost a half-million dollars, and I had barely lifted a finger. It had been so easy and fast. Almost fun. I couldn’t help feeling like a high roller, a sophisticated player who could lay his hands on big money at a moment’s notice. Despite my nagging anxiety about the gamble that Patty and I were taking, I had whipped through the pile of loan documents in less than 45 minutes.
  (tags: credit crisis mortgage lending banking subprime economics finance regulation lessons real_estate bubble greed)

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