Why Europe Won’t Implode
The global financial system is currently being roiled by one thing and one thing only: the fate of Europe. This past weekend, high-level meetings of both the International Monetary Fund and the G20 nations took place in Washington, and the predominant focus was on Europe and whether the nations of the European Union and the euro zone would be able to stave off what increasingly appears to be a make-or-break crisis over banks, the sovereign debt of Greece, and the stability of the international financial system.
Obama’s Deficit Plan Falls Short
This is becoming like the War of the Roses. President Obama advanced the needle on deficit reduction and budget negotiations by providing a new set of proposals this morning for what the White House calculates will be $3 trillion in reduced spending over the next 10 years. That follows his congressional address last week calling for additional spending and tax breaks to boost economic activity, which in turn followed months of Washington stalemate on the debt ceiling.
Could Europe’s Economic Crisis Sink Us?
As Americans fixate on the battle for the Republican presidential nomination and the continuing travails of the U.S. economy, the real story in financial land is what is happening in Europe. The issues aren’t new: concerns over the contagion of a default of Greek debt, or Irish or Portuguese or Italian, have been percolating for more than a year and a half. But there is a definite sense of late that these issues are potentially spinning out of control.
Will Obama's Plan Work?
President Obama’s speech to Congress hewed closely to the details that had already been leaked, save for the dollar amounts, which were considerably larger. Even so, the $450 billion price tag is somewhat misleading in that much of that is not new spending or new tax breaks but rather an extension of breaks and unemployment benefits that are already in place. Given that payroll tax cuts have not generated employment in the past two years, it’s is a stretch to see how they will suddenly do so now. As for unemployment benefits, they are a vital safety net, but that isn’t the same as job generating.
Fixing the Job Market
Despite the shock of Friday’s awful jobs data, Zachary Karabell says we’ve long known that it’d take years of transition and tons of money to cushion the worst effects of a profoundly changed and troubled economy.
Germany’s Risky Eurozone Bailout
Thursday morning, the German government headed by Angela Merkel voted in favor of a European bailout fund designed to aid Greece and by extension the entire euro financial system tentatively set at €440 billion ($600 billion).
That rivals in size the bailouts the United States passed at the urging of then-Treasury Secretary Henry Paulson in the fall of 2008 and again in February 2009, Obama’s bill. Whatever the deficiencies of those bills spurring job creation, they prevented a complete implosion of the financial system whose consequences would have made the resulting recession and market plunge look inconsequential by comparison. Yet here are the Europeans led by the Germans taking significant action to stem their crisis—admittedly after multiple missteps—and those efforts are greeted with yawns and derision.
Obama: Rich Need to Pay Up
UPDATE: At a press briefing at the White House Monday, President Obama formally announced a package revealed over the weekend to trim $3 trillion off the federal deficit over the next several years. Picking up on the theme of his recent jobs speech, Obama demanded that Congress move on the act immediately. “They should pass it right away. I’m ready to sign a bill,” the president said. Obama stressed the necessity of new revenue to solve the budget crisis, and said he would veto any bill that didn't bring in new money. "We can't cut our way out of this hole," he said. The new proposal would establish a minimum tax rate on millionaires to avoid loopholes, and would make cuts to entitlements and Pentagon spending. Obama said the bill would cut $2 in government spending for every $1 in new revenue.
The End of Wall Street's Big Payday
On Sept. 15, a 31-year-old UBS trader in London was arrested for fraudulently attempting to hide “rogue” trades that led to at least $2 billion in losses for the Swiss bank.
The episode was greeted with incredulity. How could a large financial institution, Swiss no less, let its risk controls slip so much that a person in a relatively junior position could lose so much of the bank’s capital? But on multiple scores, the reaction misses the point. Risky trading activity is not rare; it is ubiquitous. It is not unprecedented, and in the wake of the financial crisis that is barely three years past, banks are faced with a choice: Take ill-advised risks in a desperate attempt to maintain the levels of profit that they have become distressingly accustomed to, or become accustomed to distressingly less profit.
Al Qaeda’s Failure on Wall Street
The World Trade Center was never seen as an overly attractive piece of architecture, but as a symbol of American economic might, it was undeniably powerful. Never mind that it was built just as New York was imploding financially in the mid-1970s; it still stood as a set of dual icons representing the economic primacy not just of the United States, but of Wall Street and the entire financial industry.
Carlyle Comes Out of the Shadows
The Carlyle Group, a Washington-based private-equity firm that manages in excess of $150 billion, is going public. That, at least, is the intent of the company, which has filed papers with the Securities and Exchange Commission to set the process in motion. While it isn’t likely to happen before early 2012, the announcement generated a fair amount of attention. And the reason is that Carlyle evokes not just images of Wall Street titans, but of a shadowy nexus of money, politics, and power that hovers just under the radar of public awareness.