Harvard Business School professor Mihir Desai believes American companies and investment firms have erred–horribly–by linking manager compensation so tightly to financial market performance. In the current Harvard Business Review, he identifies this as a giant FIB, a Financial Incentive Bubble: American capitalism has been transformed over the past three decades by the idea that financial [...]
Archive for the ‘Finance’ Category
Is Incentive Compensation a Giant FIB?
Posted in Business, Finance, Microeconomics, tagged Business, Finance, Incentives, Inequality on February 28, 2012 | 5 Comments »
Financial Answers Made Simple
Posted in Business, Finance, tagged Finance, Start Up on February 12, 2012 | 3 Comments »
For the past year, I have been advising a start-up, FedWise LLC, that is working to improve American’s financial literacy. (Full disclosure: I have a small interest in the company.) FedWise’s vision is simple: to provide helpful, unbiased, reliable information to consumers about financial products and services like mortgages and credit cards. The company recently [...]
The Most Important Economic Chart of the Year
Posted in Budget, Economy, Finance, International, tagged Europe, Graphics, Interest Rates on December 21, 2011 | 2 Comments »
Ezra Klein surveyed 18 economists for their charts of the year. Here’s my candidate, courtesy of Spiegel Online: This chart illustrates the end of euro complacency. Investors once acted as though the euro eliminated not just currency risk but sovereign credit risk. All nations–from Greece to Germany–could borrow at the same low rates. No longer. [...]
How Fast Does the Stock Market Forget False News? About Seven Days
Posted in Business, Finance, tagged Finance, Stock Market, UAL on October 5, 2011 | 2 Comments »
The New York Federal Reserve just posted an entertaining analysis of an “Internet blooper” that struck UAL, the parent company of United Airlines a few years ago. As authors Carlos Carvalho, Nicholas Klagge, and Emanuel Moench note in a blog post: On September 8, 2008, a six-year-old article about the 2002 bankruptcy of United Airlines’ parent [...]
S&P’s $2 Trillion Error
Posted in Budget, Finance, Politics, tagged Budget, Debt, Deficit on August 7, 2011 | 22 Comments »
In the final hours before Friday’s historic downgrade, Standard & Poors gave Treasury an advance copy of its report. Amazingly, that report contained a $2 trillion error in its calculations of U.S. deficits and debt over the next decade. Here are four things you should know about it. 1. Treasury hoped that S&P would change its decision [...]
Five Things You Should Know About the S&P Downgrade
Posted in Budget, Finance, Politics, tagged Budget, Debt, Deficit, Interest Rates on August 5, 2011 | 11 Comments »
On Friday night, Standard and Poors announced that it was downgrading U.S. long-term sovereign debt from AAA to AA+, the first such downgrade in U.S. history. Here are five things you should know about the downgrade — four important, one trivia. 1. S&P downgraded U.S. debt not only because of the deteriorating fiscal outlook, but [...]
Playing with Fire with the Debt Limit
Posted in Budget, Finance, Politics, tagged Debt, Debt Limit, Finance, Politics, Treasury on June 24, 2011 | 4 Comments »
My latest column in the Christian Science Monitor: America sometimes takes its exceptionalism too far. Case in point: We are the only major economy that talks openly of default. Government debt has ballooned throughout the developed world in the aftermath of the Great Recession. France and Britain are as deep in debt as the United States, [...]
Treasury Offers Some Good Ideas on Mortgage Finance
Posted in Finance, tagged Fannie Mae, Freddie Mac, GSE, Housing on February 11, 2011 | 2 Comments »
Today was a big one for housing finance. Treasury kicked things off with its much awaited report to Congress on “Reforming America’s Housing Finance Market.” And then the Brookings Institution hosted a full day conference on “Reforming the U.S. Mortgage Market.“ Both Treasury’s report and the conference showed that there’s still important debate about the [...]
I Bid $28,000 for Mars
Posted in Finance, tagged Humor on February 4, 2011 | 1 Comment »
Over at Boing Boing, Lee Billings interviews astrophysicist Greg Laughlin about his formula for valuing planets. Or, more precisely, measuring how much it appears we value those planets based on (a) how much we spend to search for them and (b) planet characteristics like stellar age, stellar mass, light, heat, brightness, etc. According to the formula, Earth is worth [...]
Treasury Takes Step 1 in Avoiding the Debt Ceiling
Posted in Finance, tagged Bonds, Debt, Treasury on January 27, 2011 | 3 Comments »
As expected, Treasury has announced that it will allow the $200 billion Supplemental Financing Program to run down to only $5 billion; that will save $195 billion of borrowing authority under the current debt ceiling: Treasury Issues Debt Management Guidance on the Supplementary Financing Program 1/27/2011 WASHINGTON – The U.S. Department of the Treasury’s Assistant [...]
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