Finance time: Salmon breaks down the Goldman-SEC complaint into even finer detail. Brad DeLong has some nice thoughts also. (Late Note: New York Times appears to have in-depth report claiming "Top Goldman Leaders" oversaw the CDO deal in question.) Simon Johnson suggests that it’s time for John Paulos, the hedgefund trader, to find a lawyer. He also believes this may be the “Pecora moment” of this financial crisis—i.e. the show trial that galvanizes the nation into deep, significant financial reform. I’m not so sure. Kevin Drum explains why not:
Everyone agrees that skyrocketing leverage was a huge problem, for example. Everyone agrees that mortgage fraud was a problem.Everyone agrees that ratings agencies were a big problem. Ditto for resolution authority, risk models, OTC derivatives, and the instability of the repo funding model. So even if there's disagreement about some of the items on this list, there's enough agreement about the others that there should be no problem putting together a stringent bunch of new rules that take a pretty serious whack at Wall Street. After all, agreement on 70% of the big problems is actually more than you get most of the time.I'd disagree with the political analysis here: I think everyone (minus, oh, say, Republicans) agrees on the problems, but there's far less broad agreement on the solution to said problems, and the level of elite political consensus on a lot of the stuff that would help (i.e. Consumer Finance Protection Agency) appears to be at the same level of healthcare reform. The countervailing force in all this is that Obama appears to be far more engaged in the nuts-and-bolts--see, for example, his threat to veto any bill without good derivatives regulation--and that there appears to be far more public appetite at this point for financial reform than healthcare reform. Here’s Paul Krugman’s view of financial reform.
But we're not getting any of this. Treasury wants to shove off leverage concerns to Basel. Ratings agencies are largely getting a pass. Mortgage fraud is getting a pass. Risk models seem beyond anyone's scope to regulate and the repo funding model, like leverage, is being punted to Basel. In the end, we might get a bit of action on resolution authority and derivatives regulation, but that's probably about it.
Meanwhile, right on the heels of my thoughts on why Idris Elba should be a bigger star, here’s the New York Times with a profile about more-or-less the very same subject (WARNING: Spoilers of The Wire in that article. Yes, I care.)
Teaching philosophical reasoning to second graders.
Here’s an interview Iraqi PM Maliki did with the Los Angeles Times.