Barrett Sheridan

Stories by Barrett Sheridan

  • Has Any Good Come From Financial Innovation?

    Is financial innovation good for society? In a speech last week, Federal Reserve Chairman Ben Bernanke gave a qualified yes. Financial innovation really picked up after 1980, and "I don't think anyone wants to go back to the 1970s," he said.Ryan Avent, the new blogger-in-chief over at Portfolio's Market Movers, thought that statement rather funny:According to Bernanke, no one, "wants to go back to the 1970s," but...
  • Breakfast Buffet, Monday, April 20

    America Is "Fill in the Blank": We've already heard that America is Russia, America is Japan, and America is a developing country. Here's another hat to try on: Krugman says America is Irish. (And it has nothing to do with how much Guinness we drink.) Really? Another One?: Bank of America is the latest bank to post strong first quarter earnings. When will the backlash against bank profits begin?Don't Blame the Engineers: The financial crisis is just a pothole on the road to technological progress! Writing in the Wall Street Journal, L. Gordon Crovitz says, "The innovators who thought up the elevator, the cotton gin and space...
  • Breakfast Buffet, Friday, April 17

    Me Too!: Citigroup follows in Goldman Sachs's footsteps and says it had its best quarter since 2007. Is it just coincidence that the banks sprung to sudden health as soon as mark-to-market rules were relaxed? Things didn't look nearly so good at GE, where profits plunged 35 percent. And Google ended its 11-year growth streak.Party Pooper: In honor of the tea parties held on Wednesday to protest U.S. tax policy, Forbes looks at the historical tax rates and concludes that Americans are undertaxed relative to the citizens of other countries and relative to the past. Dept. of Odd Opinions: Financial-data provider Bloomberg finds its sleazy side in a column that somehow compares the U.S. economy to Tara Reid's breast implants. The Sincerest Form of Flattery: Just like the U.S., Russia is moving to put a strict cap on executive salaries at state companies and firms receiving government aid.
  • Breakfast Buffet, Wednesday, April 15

    Green Acres: Two-thirds of Japan's full-time farmers are 65 or older, and some are hoping that mounting job losses in the corporate sector result in younger workers going back to the fields. Crime and Punishment: Do economic hard times lead to more crime? Yes and no. Burglaries, thefts and the like tend to rise with unemployment, but violent crimes show little to no correlation. In the Department of Scary Sentences: Bankrupt bank Lehman Bros. "is...
  • Goldman's Gold

    Floyd Norris blogged the Goldman Sachs conference call this morning. For those that don't know, Goldman is in the news this week for making a reported $1.8 billion profit in the first quarter of 2009. This has been interpreted as a sign that the ailing financial sector might be ready to leap from its sickbed. But some suspicious smells still hover over the patient. For one, Goldman switched its reporting schedule from a fiscal year ending Nov. 30 to a calendar year ending Dec. 31. The first quarter of the reporting year, which normally would have been Dec.-Feb., became Jan.-Mar., in other words. That left December as an "orphan month," and it was a terrible month indeed -- Goldman suffered a $0.8 billion loss in December. Some suspected foul play, surmising that Goldman squeezed its writedowns and losses into December, making January, February and March look better than they actually were.In addition, Goldman was the beneficiary of $12.9 billion of government money...
  • Is the Financial Sector Too Big?

    Many think so. Former IMF chief economist Simon Johnson wrote in the Atlantic recently that "from 1973 to 1985, the financial sector never earned more than 16...
  • Breakfast Buffet, Monday, April 13

    Scrub Up: The Treasury Department is preparing General Motors for a fast, "surgical," bankruptcy.Earnings Season: Some big names announce earnings this week, including Goldman Sachs and Citigroup. Markets are expected to sink today on worries over the financial health of major companies. Wrong, Wrong, Wrong: More than a year into the financial crisis, Der Spiegel looks at which world leaders, business minds and pundits were right in their economic predictions -- and which were blindingly wrong. Bush, Bernanke, Trichet, and Merkel fall into the latter category; Buffett, Soros, Greenspan, and Roubini get bragging rights. Money Managers Are at Fault, Too: It's not just the banks, mortgage brokers, and borrowers that sank the economy. Blame your pension fund and university endowment, too. Big funds own 70 percent of large public companies, and they failed to police them. "These managers arguably played a major role in allowing the managers of...
  • Rebranding Recession Lingo

    As the financial crisis evolves, so does the vocabulary being used to describe—or obscure—it. Looking to neuter some of the most loaded terms, policy wonks and businessmen are feeling the urge to rebrand. Last week NEWSWEEK's Dan Gross noted Treasury Secretary Tim Geithner's transformation of toxic assets into "legacy assets"—and that's just the most salient tweak. A bailout, for instance, sounds much friendlier when it's deemed "exceptional assistance," as Geithner recently phrased it. Federal Reserve chairman Ben Bernanke and British Prime Minister Gordon Brown have backed international financial regulation, though they prefer to call it "macroprudential oversight."The private sector is also getting in on the word games. Goldman Sachs's head of mergers and acquisitions, Tim Ingrassia, recently announced that the title "M&A banker" carries too much baggage, so now his cards read "adviser to the free flow of capital." And those layoffs at Nokia last fall? Those were actually ...
  • Advice for AIG Executives

    It's Friday afternoon and there's little chance you're interested in another probing, insightful blog post, so how about a little satire from McSweeney's instead? To: AIG Executives From: AIG Corporate Security Subject: Updated Security Notification Due to a growing sense of public attention fueled by increased media scrutiny, AIG Corporate Security would like to highlight certain protective measures all employees can take in order to increase their overall safety and security. This memorandum is specifically tailored toward our top-level executives, and contains information unavailable to regular AIG employees.Be mindful at all times of your surroundings, especially if you are surrounded by a large group of very angry people you do not recognize. These are taxpayers.Be smart! In a "fight or flight" situation, it is almost always best to retreat. Do not take unnecessary risks. For many of you, this will be impossible. Read the rest here.  
  • Breakfast Buffet, Thursday, April 9

    Green Shoots Turn to Weeds: Or at least that's how the Financial Times interprets the minutes from the last Federal Reserve meeting, which were bleaker than expected. Warren Buffett is feeling a bit of the bleakness himself, now that Moody's, a ratings agency he part-owns, downgraded his investment vehicle, Berkshire Hathaway. Felix Salmon doesn't think this is such a bad thing.Rotting Apples: The Treasury Department wants to regulate venture capitalists as if they were hedge funds in order to protect against systemic risk. But a Wall Street Journal editorial asks, what systemic risk? VCs fund companies like Apple and Google in their early years; they don't engage in complicated derivatives transactions with multiple counterparties. Will regulation choke a vibrant source of innovation? "Lehman Shock" in Japan: Unemployment has always been low by world standards in Japan -- even during the country's "lost decade" unemployment never broke 5...
  • Dismal Datapoint of the Day: The H-1B Visa Lottery

    The H-1B visa is one of those policies that everyone loves to hate. It gives skilled immigrants -- scientists, engineers, researchers, etc. -- the right to live and work in the U.S. for six years, so nativists hate it right off the bat. But in fields that attract too few American citizens, such as computer programming, it has become an essential part of the hiring process. But tech executives and globalization advocates loathe it because the cap is too low, and it's devilishly hard to get one. The U.S. gives out only 85,000 each year, and 20,000 of those are reserved for applicants with advanced degrees. The demand for these visas is so strong that generally all 85,000 are given out within the first couple days of filing, which begins April 1.But not this year. Today U.S. Citizenship and Immigration Services took the rather unprecedented step of announcing that, after a full week of accepting applications, it still hadn't reached the cap. There are two ways to look at this...
  • Imelda Marcos Agrees: She's "Guilty" of Greed

     Two weeks ago our crack digital team released a package on the history of greed, which included a photographic parade of some of the greediest figures of all time. Nestled amongst the likes of Genghis Khan, Charles Ponzi and Bernie Madoff was the Philippines' own Imelda Marcos, the widow of former dictator Ferdinand Marcos, who ruled the country from 1965 to 1986. During that time, Ms. Marcos achieved notoriety for her fashionable taste -- while the average Filipino lived on less than $2 a day, Ms. Marcos jetted to New York and Rome for $5 million shopping sprees, and built up an impressive collection of 3,000 pairs of shoes.It seemed fitting, then, to open the gallery with the above image of Ms. Marcos, her rouged cheeks, jade earrings and blinged-out ring fingers a perfect glimpse into modern materialism.Apparently, Ms. Marcos doesn't disagree. NEWSWEEK's selection of her provoked a bit of controversy back in the Pacific island nation, enough that Ms. Marcos...
  • Is China the New America?

    This piece in Foreign Policy says yes. Those that agree like to point out that after World War II, Great Britain, glorious empire though it may have been, was extravagantly in debt; the U.S. was a net creditor to the world, and Britain's most important source of financing. When Egypt nationalized the Suez Canal in the 1950s, Britain wanted to fight back. But the U.S. made clear that its financial support was contingent on the UK's withdrawal from the canal. Britain had to choose between financial ruin and geopolitical power. And so the mantle of global leadership was passed from debtor to creditor.Now, of course, the U.S. is leveraged to the hilt -- the national debt recently surpassed $11 trillion -- and the world's top creditor nation is China, which sits on about $2 trillion worth of reserves. According to the FP, the story of today's financial crisis has the U.S. "playing the role of Britain -- the exhausted debtor economy -- and China taking the place...
  • Breakfast Buffet, Tuesday, April 7

    Happy Days Are Here Again?: Obama's still got it: Two-thirds of Americans approve of his job performance, according to a new New York Times poll. And though 70 percent of respondents said they were worried about layoffs affecting their families, the percentage of people who thought the country was on the right track jumped from 15 percent pre-inauguration to 39 percent today. That's the highest it's been since early 2005.Prodigal Son: The son of ex-Treasury Secretary Henry Paulson is staying busy during a down economy trying to bring a Major League Soccer franchise to Portland, Oregon. He's committed $50 million of his father's fortune (which he earned in his pre-government role as CEO of Goldman Sachs), but he wants the city to pony up $65 million. He's finding it a tough sell, especially since Oregon, as we learned yesterday, is the saddest state in the nation.Reverse Offshoring: The head of Sallie Mae, a U.S.-based student lending company, has said...
  • The Saddest Places in the United States

    MainStreet.com (a personal-finance-oriented offshoot of TheStreet.com) just released its Happiness Index, a Prozac-addled tweak on the famous Misery Index. The latter, which combines unemployment and inflation statistics, captured the prevailing worries of the stagflation-prone 1970s; now that inflation has been tamed, MainStreet.com clearly felt it was time to throw housing into the mix.  The list ranks the fifty states and Washington, D.C. on three measures: unemployment, foreclosures and non-mortgage debt. It's a bit silly to call it the "Happiness Index," since, as we all know, money doesn't buy happiness (although maybe credit card debt could...). But it does provide a quantitative and fairly substantive accounting of the states hardest-hit by the housing bust.So which states were most miserable? Not surprisingly, Sunbelt States like California, Nevada and Florida make up most of the bottom 10, largely because of their high foreclosure rates. The most...
  • Why Smoot-Hawley is Like a Melting Glacier

    The Smoot-Hawley Tariff has become a bogeyman in economics circles, a piece of misguided, Depression-era legislation that raised tariffs to exorbitant rates and choked the world trade system near to death. I was surprised, then, to find this piece in Prospect magazine, by highly regarded development expert Ha-Joon Chang, who teaches economics at Cambridge, arguing that Smoot-Hawley actually did little to worsen the Great Depression. "The '1930s: never again' story assumes that protectionism is always bad," Chang writes. "But this is not true."...
  • How To Count Hoovervilles?

     This is a sentence you don't ever want to read:"The quality of the US census may be undermined because of rising numbers of people living in garages, tents, basements and motels as the financial crisis deepens." That's from the Financial Times, which says that "there is little data on the rise in 'non-traditional' housing, which is something the Census Bureau will generate for the first time as it seeks people out this year." The Bureau will hire 2,000 additional census-takers to deal with this population, which is usually small enough to fly under the radar.And if the rise in "non-traditional" housing in the U.S. is large enough to impact a census that will count over 300 million people, I wonder what the impact has been in hard-hit developing nations like those in Eastern Europe? For more on the human impact of the housing bubble's burst, view our photo gallery.
  • Breakfast Buffet, Friday, April 3

     G20 Recap: The biggest win was an additional $1.1 trillion in funding for international aid agencies, and Jeffrey Sachs said simply that the results were "deeply heartening." Dani Rodrik called it a "a victory for the Europeans." Felix Salmon at Reuters said the resultant statement was "more substantive and harder-hitting" than most. Paul Krugman, who had veered toward pessimism lately, called the results  "substantive and important ." But a New York Times editorial felt the whole thing "fell short." Across the pond at the Guardian, Mark Thoma said that the failure to arrive at an international stimulus package was "bad for the US, and bad for the world more generally." Slowdown? What Slowdown?: McKinsey expects China to have more than four million "wealthy" (i.e. an annual income greater than $36,500) households by 2015, up from 1.6 million last year. That would give it the fourth-highest number of wealthy...
  • Denial Is a Powerful Force

    Former AIG CEO Maurice "Hank" Greenberg is clearly still in the first of the Five Stages of Grief. As he told the Wall Street Journal:  "I don't feel any responsibility at all."That's a bold statement for a man who spent 38 years building AIG into an international powerhouse, started the financial-products unit responsible for its implosion and left the firm only in 2005 -- at which point "the unit had already sold about half of the swaps that caused the biggest problems."
  • The Solution to Future Housing Bubbles: Religion

    I just came across a fantastically interesting paper from Christopher Crowe, an economist at the IMF. (Hat tip to Zubin Jelveh at Economix.) Citing Robert Shiller's work on "irrational exuberance," Crowe sets out to test the hypothesis that "the housing cycle should be more muted in areas with high concentrations of households whose beliefs or 'values' make them less prone to participating in a speculative mania." And who better to test the idea on than evangelical Protestants, whose fervent belief in Scripture, one would assume, dampens the human greediness necessary for rampant speculation. Evangelicals "embrace a unique set of economic values that is suspicious or even hostile toward wealth accumulation," writes Crowe. He finds that in areas with a higher proportion of evangelical residents, the variability in housing prices is less extreme. In other words, less boom, but also less bust.  
  • Breakfast Buffet, Wednesday, April 1

    The economy is back on track and economists expect global growth of four percent this year. Happy April Fool's Day!Apocalypse Now: On the eve of the G20 Summit in London, protesters take to the streets. "Four marches, led by representations of horsemen of the apocalypse,...
  • Greenspan: Free Markets to the Rescue!

    Often when I turn on CNBC or open the Wall Street Journal I'm greeted with a headline or statement about "how the market reacted to" this or that, with the "this or that" often being a speech by Obama, Geithner, et al. Occasionally I can't help myself: I snort and say aloud, "Who cares?" I have some money in mutual funds and the like, so certainly I care whether the markets are up or down. But when did the Dow and the S&P 500 become the sole barometer of success or failure? There must be constituencies other than day traders and broker-dealers and equity salespeople with which to concern oneself....
  • Readers Head to the Alps

    This blog has only been live for two days and already we're getting excellent comments from our readers. We want Wealth of Nations to be a conversation, and when you say something smart, we plan to highlight it.I was pleasantly surprised by the reaction to my post on the end of Swiss banking secrecy. I wasn't sure international banking regulations and cross-border information-sharing would interest many readers, but apparently secret offshore accounts stir the imagination.Several readers noted that Hollywood's fascination with Swiss banks might stem from more than just their usefulness as plot devices. "Never mind making a movie about the Swiss bank," writes sgm17. "It looks like the very...
  • The Short, Wondrous Life of the International Reserve Currency

    We posted a couple times last week on the kerfuffle surrounding remarks by China's central bank governor, Zhou Xiaochuan, that advocated "creat[ing] an international reserve currency that is disconnected from individual nations." To many, this sounded like an attempt to displace the dollar from the top of the currency heap, and a sign of China's growing ambitions.Brad Setser, a macroeconomist at the Council on Foreign Relations, who I quoted in my earlier post, took the weekend to read Zhou's comments more closely and came up with a different interpretation: "In some ways Zhou’s call is a sign of weakness as much as a sign of strength," he wrote on his blog yesterday.Zhou stopped short of calling for a new global currency like a Bancor. What he actually advocated is a larger role for some arcane device called "special drawing rights." SDRs were created by the International Monetary Fund in 1969 because the Fund didn't want its loans...
  • Shedding Light on the Alps

    Pity Hollywood. The credit crunch has killed -- or at least maimed -- one of the favored tropes of spy movies and action thrillers: the secretive Swiss bank. Celluloid terrorists and criminals (and probably a few real ones, too) used them to stash their ill-gotten gains, and uber-assassin Jason Bourne found secrets to his true identity (and a gun and wads of cash) in an Alpine vault. By and large, the Swiss bank as Hollywood knew it no longer exists. U.S. officials have long wanted to make a dent in the European nation's famed banking secrecy laws; they saw it as a refuge for tax evaders and terrorist financiers. In June, they secured a guilty plea from Bradley Birkenfeld, a former banker for Zurich-based UBS who admitted to helping a wealthy California businessman hide assets from the IRS. The always-helpful Birkenfeld even smuggled diamonds in a tube of toothpaste on a flight into the U.S. for his client. Then, in February, UBS agreed to hand over to U.S. authorities the...
  • Cramergate Continues

    You probably thought the Jim Cramer vs. Jon Stewart feud was over. And it is, for the most part. But I just stumbled on this video from PBS. It's a clip from an episode of the investigative journalism series Frontline from way back in 1997, and the first couple minutes show Jim Cramer in action as a hedge fund manager. He's just as frenetic and ridiculous-looking as he is now, except he's shouting derivatives orders at traders instead of bopping oversized sound effects buttons. (He's also a lot heavier -- clearly the markets are more stressful than television.) It's mostly just a curious aside to the larger financial story, but it does remind us that the roots of the current crisis run deep. Cramer and people like him have been hyping stocks since at least the 1990s -- as Frontline puts it, he's "a born huckster for the market." That helped cement in peoples' minds the idea that Wall Street is where fortunes are made -- and if you're...
  • It's All About the Benjamins

    As an American, I of course love the fact that the dollar is the world's reserve currency. I just took a trip to Costa Rica, and was able to pay for almost everything in greenbacks. Globally traded commodities like oil are priced in dollars. It's the de facto language of global finance. And since every country needs some dollars for international transactions, the U.S. has access to lots and lots of cash, enabling us to borrow cheaply.  So naturally, all this talk of the dollar losing its preeminent status worries me a little. A small furor began on Monday when Zhou Xiaochaun, China's central bank governor (i.e. their Ben Bernanke), released an essay calling for an "international reserve currency that is disconnected from individual nations." Translation: "Now that you guys are printing money to prop up your banks, we expect inflation in the U.S., which will erode the value of the $1 trillion in U.S. currency we hold and cause us to lose our shirts. We...
  • Playing Catch-Up

    Okay, I get it -- you're busy, you've got kids, a job, a mortgage to (hopefully) pay. You haven't had time to navigate the alphabet soup of the financial crisis -- CDO, LBO, CDS, SIV. But it's getting a little hard to ignore, what with even late-night talk show hosts talking about hedge funds and derivatives with the President.Luckily, there are plenty of accessible, easy-to-understand resources out there by now, so it's easy to get up to speed.The most recent one we've seen is this video by Jonathan Jarvis, a graduate student at Pasadena's Art Center College of Design. It is not only hugely informative (my Newsweek colleague Adam Kushner calls it "the best distillation I've seen") but also a great piece of eye-candy. Design and graphics snobs will rejoice.Part 1:Part 2:If you've got a bit more time on your hands, public-radio show This American Life put together two hour-long programs about The Great Panic of 2008. The first,...
  • AIG: A Backlash Against the Backlash?

    The list of most dangerous professions includes jobs like Bering Strait crab fishermen and Pacific Northwest logger. A new contender: AIG executive. After the collapsing insurance giant, which has accepted $170 billion in taxpayer bailout money, announced it was paying out $165 million in bonuses to top employees -- including many in the Financial Products division, the Mordor-like seat of financial evil -- populist rage crescendoed. Fed Chairman Ben Bernanke said he wanted to sue to prevent the payments. Protesters arranged bus tours of the execs' lavish Connecticut mansions, where some have had to hire private security guards. Sen. Charles Grassley said the lucky execs should "resign, or go commit suicide." You know you're unpopular when a sitting senator wishes hari kari upon you. But are we beginning to see a backlash against the backlash? Maybe not, but at the very least some of the targets of the fury are beginning to strike back. Last night, the New York...