Barrett Sheridan

Stories by Barrett Sheridan

  • The Best Development Plan in the World Originated With...the British Empire?

    The secret to turning a poor nation into a rich one can't be found in a World Bank report. It wasn't hatched in the corridors of the International Monetary Fund, either. It came from the British Empire.That is one way, at least, of interpreting Stanford economist Paul Romer's new plan for turning economically backward countries like Cuba into engines of growth like China. Experts have long known that the traditional tools of development don't work: free trade, foreign investment, and charity have failed as many countries as they've helped. The rot in a dysfunctional country is at its core—in the laws, institutions, and informal rules that govern daily life.How to fix a problem so fundamental? Let a rich country take over part of a poor one. The hope, says Romer, is that the superior norms of the developed country will take root abroad. He calls his plan Charter Cities and illustrates it with a thought experiment. Imagine if the U.S. closes its prison at...
  • Can a London Startup Make Payday Loans Respectable?

    Being poor is expensive.Take, for example, one service targeted at the down-and-out: payday lending. Drive past any dusty suburban strip mall and neon lights flicker the promise of a “Cash Advance Here.” Payday lenders provide very small and very short-term loans (often just a couple hundred dollars for a week or so, until the next paycheck arrives). They’re not for everyone, but for families living from one paycheck to the next, these loans are sometimes the only way to keep the lights on.Payday loans have long been vilified by politicians and the media because of their exorbitant fees. A two-week loan for $300 can easily carry $50 in fees and interest. That’s a compounded annual interest rate of 5,403 percent. And because the borrowers can be desperate for cash, payday lending has become nearly synonymous with words like “usury” and “predation.” Fifteen states have cracked down on the practice, and Congress is considering a nationwide interest-rate cap, which would put much of the...
  • Populist Outrage? There's an App for That.

    The iPhone has apps for reading the news, checking bank accounts, and streaming music. Now it's got one for exacting revenge on overpaid CEOs and Ponzi schemers.Squash the $treet, a creation of Last Legion Games, lets you "watch the shady bankers, creepy fraudsters, and corrupt CEOs flee their gilded offices, sprinting for the nearest escape vehicle," as the creators put it. Once they're out on the street, in the "festering heart of the city where all the thievery and greed began," you can "squash and flick the snarky scoundrels."The app is a testament to the status of videogames─and iPhone apps in particular─as pieces of cultural criticism. Talented developers who want to make a pointed criticism of our collective economic mess (and, they hope, a wad of cash) can code a game in just a few weeks, putting it on the market while tempers are still simmering.The game came out July 4─note the symbolism there─and had a modest number of downloads in...
  • Someone Is Wrong on the Internet!

    Yesterday was one of those days where so many people on the Internet were wrong that I almost couldn't sleep because of it. I'll restrain myself to just one example: Mark Gimein's defense of Goldman Sachs in The Big Money. (Disclosure: Newsweek and The Big Money are owned by The Washington Post Company.)  I don't have any problem with a well-reasoned defense of Goldman's strong second-quarter profits, seen by some as "obscene." Bankers are supposed to be greedy and grab what they can, so anti-Goldman anger is in large part misdirected─it probably should be focused on the regulators and politicians who gave trillions in tax dollars to Wall Street but required little in return, other than a polite request: "Please don't go bankrupt and destroy the world." But Gimein seems to completely misunderstand why people are upset. In his words: The real objection of Taibbi and other Goldman bashers is that Goldman, except for one bad quarter ...
  • CIT = Fail-Worthy

    CIT is definitely not too big to fail. At least for now. Maybe the company's CEO, Jeffrey Peek, will find a more receptive audience in the administration as bankruptcy nears, but for now, its $80 billion in assets was deemed sufficiently small enough to squeeze through the bankruptcy process.Or, looked at another way, perhaps Peek and his employees just didn't give enough money to the Democrats. As Simon Johnson wrote on Monday, while everyone was debating the fate of CIT:The lack of strong connections between CIT’s CEO and senior Treasury...
  • Grade Inflation and 'Too Big to Fail': Everyone Gets a Gold Star!

    The big financial news this week is that CIT, a century-old bank, might be next in line for a government bailout.As Bloomberg notes, since 2003 the finance firm has been run by Jeffrey Peek, formerly a top executive at Merrill Lynch. Peek revamped CIT's loan portfolio, which used to be concentrated on financing for small businesses, and moved the firm into new, high-yield areas like─you guessed it─subprime mortgages. Since 2007, the company has reported eight straight quarters of losses, and its debt is now rated as junk. CIT has to pay back $1 billion to lenders next month, and it looks as though it needs Treasury's help to do so.But the real story isn't whether CIT sinks or swims, but what it implies for the financial system if it does indeed get a government bailout. Economist Simon Johnson writes:What happens to CIT will help define exactly where we are with regard to “too big to fail.”  ...
  • Datapoint of the Day: Goldman's Gold

    Goldman Sachs announced its second-quarter results today, and they were impressive. Here's a bit of fun math to illustrate just how impressive: GS set aside $6.6 billion this quarter to pay employee bonuses at the end of year. GS has 29,400 employees. That works out to an average bonus of $224,000 per employee -- for the second quarter alone. Annualized, that works out to a yearly bonus just shy of $900,000. Not bad for a year in which the rest of the world is debating whether we're in the early stages of a new Great Depression or just a very severe recession.
  • Sell America and Buy India, Says George F. Will

    In Sunday's Washington Post, George F. Will takes a swat at Obama, arguing that his pro-government policies are "diminish[ing] America's competitive advantages." He writes:Let's guess: Will a person or institution looking for a place to invest...
  • How to Create Your Own Economy

    After reading a review copy, which was delightful and provocative throughout, I asked Cowen a few follow-up questions by e-mail:  A large part of your book...
  • Another Reason to Watch the Uighurs

    As Rana noted yesterday, investors (and anyone concerned about the future of China) should watch the Uighur unrest carefully, even though it's happening in an economically isolated, far western province of the sprawling country. She drew a link between autocracy and growth. Here's another reason to pay attention: Mexico. It was, after all, the 1994 Chiapas uprising that caused foreigners to pull their money out of the country, leading to a painful currency devaluation and a severe recession. The effect wasn't immediate. As the Latin America expert Andres Oppenheimer writes in his book on modern Mexico, Bordering on Chaos, the Chiapas situation simmered for a bit until an emerging-markets investor from San Francisco visited San Cristobal, decided she didn't like what she saw, and recommended pulling money out of the country. That was the first domino that led to an international collapse. China is, of course, in a much better macroeconomic position than Mexico was...
  • Who's Searching for the Stolen Goldman Code?

    GoldmanGate is certainly bringing out the inner spook in people. Over at Cryptogon, a blog I had never heard of with a penchant for conspiracy theories, the author set up a honey trap to lure web surfers trying to find the top-secret trading algorithm stolen from Goldman Sachs. By cleverly toying with his headlines and text, he set up one of his blog posts so that it would appear in Google results as a link to the stolen trading platform (see image above). When seekers click on the link and visit his site, he finds out a smidgen of information about the seeker, often including the place of employment.So who's hunting around for the illicit code? Here are some of the visitors:Goldman Sachs employees (of course)MicrosoftThe New York City Police DepartmentThe Department of Homeland SecurityBatterymarch (a quantitative trading firm) Now, of course, a lot of these hits could be from readers of the blog, or people who caught a whiff of the clever game early on, and passed the link on...
  • Adventures in Cybercrime

    It is often a difficult task to make finance seem sexy and interesting, but there's a financial story now unraveling that effortlessly rivals the best James Bond or Jason Bourne novel. ...
  • Boomers, You're Responsible for the Great Moderation, Too

      There was a glorious time between the mid-1980s and 2007 when inflation was low, economies boomed, and recessions were short and infrequent. In general, the business cycle -- an economics term that refers to the cycle of growth, contraction, and recovery that's a feature of every normal economy -- was subdued. When the economy slowed, it didn't slow for long.Economists have wracked their brains trying to explain this period of time. Some attribute it to the rise of China and India, which fed the world with low-cost goods. Others say it was Alan Greenspan's skilled manipulation of interest rates. Others think it was just blind luck. Now, two economists at the Minneapolis Federal Reserve say we have baby boomers to thank.* In their own words:  We find that demographic change accounts for roughly one fifth to one third of the moderation experienced in the U.S. Clearly, demographic change is not the sole factor responsible for this episode; nevertheless, demographic...
  • How to Stop Bribes? Pocketless Pants

    Marginal Revolution points us to another bit of ingenuity: pocketless pants as a bribe-stopping measure. That's the Nepalese government's tactic, anyway. Commenters point out that McDonald's and casinos long ago figured out that no-pocket pants keeps employees from helping themselves to the contents of the till.
  • Are "Virtual" Sweatshops and Currencies a Threat to China?

    Our Beijing bureau chief, Melinda Liu, is in town and mentioned to me yesterday that the Chinese authorities are cracking down on "virtual" currencies. What's a virtual currency, you ask? In online multiplayer games like World of Warcraft, players collect loot in order to buy weapons and armor for their characters, and to advance through the game. For many, this is a very, very serious pastttime -- as evidenced by this teen's reaction when his mother canceled his WoW account.Some players are so serious, in fact, that they'll pay real-life cash for the virtual gold. When clever entrepreneurs figured this out, they started hiring people to work in "virtual sweatshops," playing WoW and similar games for hours at a time, collecting loot to later sell on virtual currency exchanges. This has started to worry Chinese officials, says The New York Times:The coin of fantasy realms have already moved markets here....
  • Breakfast With George Soros

    This morning The Wall Street Journal hosted a breakfast with über-investor George Soros, the man who "broke the Bank of England" by betting against the pound and earning a billion dollars for himself in the process. Last year, in the midst of a declining market, he came out of retirement to take control of his Soros Fund Management, which was up nearly 10 percent in a year when the S&P 500 shed about 40 percent. Below are selected quotes and ideas:...
  • Today in Expected News

    Madoff is sentenced to 150 years in prison. That means the 71-year-old Ponzi schemer will be free at age 221.
  • Want to Know Which Bank Will Fail Next? Check Employees' Email Habits

    This is brilliant: using email traffic to predict a coming crisis. Two computer scientists in Australia got their hands on 517,000 emails sent by Enron employees in the 18 months before the company's demise. They found that about a month before the collapse, communications patterns changed drastically: employees got more clique-y.For example, the number of active email cliques,...
  • Michael Lewis's Pearls of Wisdom

    There are a lot of great bits in Charlie Rose's recent interview with Michael Lewis. (The link is here, via Paul Kedrosky. Skip to 21:10 if you don't want to hear him talk about fatherhood.) A couple favorites:On the "green shoots" theory and the health of banks: "The Obama Administration has been very good at creating false confidence."On regulators' Wall Street-centered view of the world: "It's in the air they breathe, that they cannot imagine a world without Goldman Sachs. It's not explicitly corrupt, but they think the people who know are the people from Goldman Sachs."On regulators' Wall Street-centered view of the world part 2: "The case of AIG is the pure case. Here they have an institution that has, essentially, gambling debts outstanding to all the major firms on Wall Street. There are a lot of ways to deal with these gambling debts -- they could have just said the government's not paying them off, you...
  • If Barclays is Buying a Subway Station, Shouldn't Citi Follow Suit?

    The news that Barclays, a British bank, will pay $4 million to rename the Atlantic Ave. subway stop in New York City's Brooklyn borough has attracted quite a bit of interest. It does seem odd. Although Barclays made a profit in 2008, it was 14 percent lower than the year before, and sponsoring a mismanaged, underfunded public transport hub might be considered a frivolous expense while the bank still faces the most challenging financial environment in seven decades. But perhaps, just perhaps, this was a smart move. After all, Barclays acquired much of the dearly-departed Lehman Brothers, so it's probably looking to expand its name recognition in North America. Barclays already plans to sponsor the sports center that will be built at the nearby Atlantic Yards site. Why wait to begin your publicity blitzkrieg when fans walk in the stadium? Better if your corporate logo is on their minds from the moment they start planning their trip to the game.The move could prove so...
  • More on the Goldman Bonuses

    James Kwak of Baseline Scenario follows up on the Goldman bonus report: Like most things, there are two ways to interpret this. For the...
  • "I Want Money," Sings Goldman

    Before reading this post, I suggest first playing the video below. Consider it a theme song of sorts for articles like the one excerpted below.Okay, now that you're humming along to the appropriate music, here is the relevant excerpt:Staff at Goldman Sachs...
  • Buying Gold From a Vending Machine

    How badly do you want gold? Investors, who view it as a safe refuge in an inflationary environment, are paying a premium for it these days, and the commodity closed at $930/oz yesterday. But for some people, it's not enough to buy into a gold-focused ETF or purchase a slip of paper saying you're entitled to so many ounces of the precious metal. Wouldn't it be nice if you could just buy a weighty, satisfying bar of gold from a vending machine?One German entrepreneur thinks so. Thomas Geissler, owner of TG-Gold-Super-Markt, will install 500 "Gold to go" machines in European locations by the end of this year. The Financial Times tested one in the Frankfurt airport yesterday:A vending machine in Frankfurt Airport yesterday appeared to be a...
  • Breakfast Buffet, Tuesday, June 16

    Too Good to Be True: Darren Aronofsky, director of Pi and Requiem for a Dream, is set to direct an adaptation of Nassim Taleb's bestselling economics book, The Black Swan. Natalie Portman will star. Next up: Martin Scorcese adapts Keynes' The General Theory of Unemployment, Interest and Money. (Just kidding. The second part, not the first one.)A Smaller MySpace: The Murdoch-owned company is shedding 30 percent of its workforce. A "More Diversified" Global Currency System: That's what the BRICs want. They're meeting this week in Russia. My guess is they offer up a couple ominous-sounding statements, but make little headway in terms of binding agreements to diversify their dollar holdings.
  • Breakfast Buffet, Monday, June 15

    Laid Off? Start a Business: Over half of this year's Fortune 500 firms were started in a recession or bear market.An Interview with Paul Krugman: "The risk of long stagnation is really high." Krugman has become very Cassandra-like lately but he has a Nobel Prize so we more or less have to listen to him.Checkmate at the Yellowstone Club: The tale of the Montana ski resort for the ultra-wealthy is a familiar one -- reckless borrowing, the over-reaching of the rich, overpaying for property -- but the details are fascinating and well-told.The Fed Calls the Shots: Should people who buy boats and snowmobiles be eligible for cheaper financing from the Federal Reserve?
  • Breakfast Buffet, Thursday, June 11

    Mr. Lewis Goes to Washington: Ken Lewis, BofA CEO (but no longer its chairman!) testifies before Congress today. Felix Salmon says he did the right thing for the country when he agreed to acquire Merrill Lynch, but probably not the right thing for his shareholders.Dollars and Sense: Tony private-equity firm KKR is losing its shirt, having borrowed tons of money to buy companies for inflated prices over the course of 2006 and 2007. But Dan Gross reports that one of its acquisitions is still in the black: Dollar General, the dollar store with 8,400 outlets across the country. You Need to Work on Your Lats: Nouriel Roubini tells us that Latvia's currency, the lat, is about to come tumbling down. Sometimes I wonder if a smart programmer could create a Nouriel Roubini robot that homes in on the day's economic drama and automatically prophesies disaster. Wouldn't that be fun? Another One?: You're forgiven if you forgot that the G8 finance ministers are meeting this...
  • Baby Boomers: It's All Your Fault

    There is no shortage of scapegoats to finger in the credit boom and bust. Exotic derivatives, overcompensated executives, Alan Greenspan, the SEC, reckless borrowers -- all have worn the scarlet letter at one point or another. But the list has not yet been exhausted. Baby boomers, it's your turn.The Baby Boom lasted from 1946 to 1964, and some 78 million American children were born during that time. As this cohort ages, its sheer size overshadows the rest of society. If you look at an "age pyramid" for the U.S. (shown below), the baby boomers are the metaphorical bulge in the python's throat.   As this bulge moves from bottom to top, it is having a dramatic impact on the economy. Indeed, the impact is so large that there are hedge fund managers that specialize in picking stocks that will benefit from boomers' buying habits ("Go long on denture manufacturers!").The big question, of course, is what happens when boomers start to retire. The oldest of...
  • Breakfast Buffet, Wednesday, June 3

    The Toothless Bond Vigilantes: When Treasury yields rose from a low of 2.1 percent to 3.5 percent last month, commentators thought it was a sign that "bond vigilantes" were pushing back against the U.S. government and its endless issuance of new debt. Not so, says Martin Wolf -- the rise in rates is actually a very good thing, and a sign that deflation fears are gone.A Real Humdinger: As General Motors sheds its crappy assets, first on the chopping block is Hummer, maker of the gas-guzzling, military-caliber vehicle once favored by Paris Hilton and other celebs. Who's buying it? Why, China, of course! The idea of 1.3 billion people with access to an automobile that gets around 10 mpg can't bode well for the environment.The Incredible Lula: When he was first elected in 2002, "the nation’s currency...