RIP Jack Kemp

Read this on the FT today, as former Congressman and football player Jack Kemp wrote many years ago (and to which I agree):

In trade, as in taxation, regulation and every other policy area affecting dayto-day economic decisions, there is no third way. There is only a right way, which values freedom and opportunity and a wrong way, which encourages statism and bureaucracy.

RIP Jack Kemp.

The end is the beginning is again the end for Thatcherism

I found it quite a delight to read this piece from Gideon Rachman from the Financial Times.  Perhaps because I am not as well versed on Thatcher and her policies so reading this provided a bried but good background.

By the end of the Thatcher era, free-market reforms were being pursued in China, eastern Europe, India and the Soviet Union. On her last visit as prime minister to Mikhail Gorbachev’s Russia, Mrs Thatcher noted wryly that the new mayor of Moscow seemed to be a disciple of her own economic guru, Milton Friedman.

Almost everything that Mrs Thatcher opposed – nationalisation, raising taxes, Keynesian economics – is back in fashion. One by one, the signature policies and achievements of the Thatcher years are being dismantled in Britain.

But these days [Nicolas Sarkozy] likes to be photographed clutching a copy of Das Kapital. Mrs Thatcher venerated the free enterprise of the US. But the new US president seems strangely enamoured of the European social system.

Read the entire thing HERE.

Not a banker, never a banker.

I recognize there were more imp0rtant things discussed in today’s hearing of Treasury Secretary Timothy Geithner before the TARP Oversight Panel.  But for some comedic relief, a funny exchange took place during the hearing.  The characters: Timothy Geithner, AFL-CIO General Counsel Damon Silvers, and former New Hampshire Senator John Sununu. A cameo by Warren.

Silvers: And i practiced law, and you’ve been in banking…

Geithner: I’ve never actually been in banking. I’ve only been in public service.

Silvers: Well, a long time ago. A long time ago.

Geithner: Never, actually, never.

Silvers: Investment banking…

Geithner: Never investment banking. spent my entire life in public service, in the treasury…

Silvers: Alright, very well then.

Sununu: Just for the record, I will never mistake you for an investment banker

Geithner: I don’t think you meant that as a complement but I’ll take that as a complement.

Warren: I’m not sure that makes me feel better.

Ahhh, there’s always something to take from these hearings.

Who’s hiring?

Fortune named some of the firms that are hiring. Surprisingly, BofA is one of them.

See the rest of the list (and the positions they are hiring for HERE.

Also see who the best employers to work for are HERE.

Pay less, keep more!

This is the basic premise of a short blog entry by FT’s John Gapper.

Skadden, Arps, Slate, Meagher & Flom, which as the New York Times puts it, is “a notably gruelling place for a lawyer to work”, is offering all 1,300 of its associates – employees below partner level a year off, on a third of their salaries, as a means of cutting costs and sitting out the downturn.

I suppose this mostly applies to those who are particularly in a better situation than their peers, because after all, paying a third or whatever fraction still does cost something.  And when applied to a thousand or so employees is still worth quite a handful.  For some, letting go of redundancies are just plain inevitable.  But when companies have the options of paying a group of employees a fraction of their original compensation, instead of letting go of more, the first option is without a doubt much better.  Gapper ended the entry by saying,

It is very expensive to find well-trained employees who fit well into any business and are highly-productive. Having found them, even if there is insufficient work for them to do, it is probably cheaper to keep them on retainer than to discard them.

Which is true to a certain degree. But then again 1, it depends on the kind of jobs are being vacated and 2, a lot of the people let go now are perhaps just as qualified as the others.  The way I see it, what looks more appealing is to see less layoffs because it’s just brutal to see how bad things have become (and would become).

Give China a break. For now.

When China’s Premier Wen expressed concerns about a falling dollar, fears abound that it was the signal that China would be slowing down, if not stop the purchase of US assets.  Maybe valid but there is perhaps another reason that the fear might materialize (at least the slowing down would) and it’s not simply about the drop in the value of the greenback.  One just needs to look at the country’s reserves.  In a post by CFR’s Brad Setser, he explains:

[B]y my count, China’s total US holdings fell by $13 billion. Short-term claims fell by $11.3b, and long-term claims fell by $2b. China’s trade surplus was particularly low in February (largely for seasonal reasons), so less money was coming in. More importantly, one month does not a trend make.

Looking at the following graph might help put things into perspective:

Goldman’s just a piece of the puzzle

Goldman Sachs in recent days has been in most people’s minds for three reasons: it pre-announced its earnings (a huge one at $1.8bn) a day before it was scheduled to, it raised $5bn in capital for $123/share, and it is becoming loud about its intentions to pay back the TARP money it received from the govenment.  Wait, there’s a number four: it has some $164bn extra funds and liquid assets to buy distressed securities and loans if it wanted to.

Given the stringencies of the strings attached to TARP, it is not incomprehensible why some banks would want to pay back the money as soon as possible.  Somehow, there’s something about Goldman Sach’s intention that makes it look questionable so much so the idea of not letting them pay back the money even if they can all of a sudden looks like a good idea.

John Gapper of the Financial Times writes today specifically on the issues.

Mr Blankfein’s argument is seductive: it is Goldman’s “duty” to pay back the $10bn in taxpayer money it took last autumn when its future – and that of the global financial system – looked dicey.

Once it has repaid the $10bn, Goldman hopes to go back to paying employees what it wants, buying and selling more or less what it fancies and operating as before.

Immediately after hearing about Goldman’s intentions, I thought of Jamie Dimon who comes as more cooperative in this matter.  When asked if JP Morgan is paying the TARP money soon, as far as I can remember, what he said was that the bank would try to cooperate with the government as much as possible, which I could only take to mean that while it is burdensome to be under government’s (and the public’s) supervision 24/7, there is sufficient level of understanding about the implications of forcing the taxpayers’ money back.  (Although, with all the buzz Goldman has created, who knows if Dimon might just have a change of heart?)  Goldman’s Blankfein did not seem to have this kind of stance.

Election in Sudan

Diverging for a second from the economy and the markets to international affairs, Alex de Waal of Social Science Research Council conducted a book review of Wars, Guns, and Votes, by Paul Collier.  With a focus on elections, de Waal’s post on the Council’s blog took note of the applicability of  Collier’s study on African nations.  Specifically, de Waal looked into Sudan (the blog aptly called Making Sense of Darfur) and presented the following points (from his review of Collier’s book:

• For countries with incomes below $2,700 per capita, democratic elections increase the risk of conflict. For richer countries, it’s dictatorship that is more dangerous.
• [Collier] produces evidence that suggests that in poor and unstable countries, individuals with a criminal bent are more likely to enter politics (and succeed).
• While bribery and miscounting votes are the preferred strategies of the incumbents, violence tends to be the strategy preferred by the weaker challenger. For instance, Kibaki vs. Odinga in Kenyan elections.
• A very important, if under-developed, side argument in Wars, Guns, and Votes is that what drives rebellion is not grievance but feasibility.

He also cited three imporant lessons, which the book failed to draw:

Drinking over sadness, sadness over drinking.

And another tax update for y’all. Joe Six-Pack, pay close attention.

In their sober unwisdom, [Oregon]’s pols plan to raise taxes by 1,900% on . . . beer. The tax would catapult to $52.21 from $2.60 a barrel. The money is intended to reduce Oregon’s $3 billion budget deficit and, ostensibly, to pay for drug treatment.

If it passes, Oregon will overnight become the most taxing state for suds, one-third higher than the next highest beer tax state, Alaska.

Read more from the WSJ HERE.

Breaking down the numbers

Unemployment is continuously growing and currently stands at a rate of 8.5%.  To shed some light, Edward Glaeser, an economics professor at Harvard wrote for NYT’s Economix shifting the focus from the unemployed MBA’s to those who have it worse.

The overall unemployment rate for the more educated is only 4.3 percent. Individuals with a high school degree, but no college, have a 10 percent unemployment rate (not seasonally adjusted). The unemployment rate for high school dropouts is 15.5 percent. Moreover, the unemployment rate gap between the most- and least-skilled is widening, not narrowing. Between February and March, the unemployment rate for college graduates increased by one-tenth of a percentage point. Among high school dropouts, the unemployment rate increased by four-tenths of a point.

Read more HERE.

Summers sees ‘mixed’ picture

In today’s interview with CNBC, Larry Summers talked about various issues including the state of the economy, banks, and the stimulus.

“It’s a complex picture, we inherited a very difficult situation, it’s going to take a long time to work through. But after a period when it was a very steep downslope, it certainly doesn’t have quite that steepness at this point.”

When asked about the rumors of Goldman Sachs returning the TARP money back, he just gave a general comment:

“It’s our objective to have a private sector-based system.  That means a system where people don’t have government capital and work themselves to a place where … they don’t need government capital.”

He also believed the stimulus will be more stimulative than people believe, mentioning the low cost of construction as one of the factors contributing to that.

See the rest of the interview below

Vodpod videos no longer available.

Timmy Brown

Not a Tim Geithner hater but I thought this piece of caricature was cute.

Courtesy of Drew Friedman at Drawger.