Eurobonds for Stimulus Spending

Meeting on May 23, 2012, the E.U.’s European Council failed to come up with a plan to offset the recessionary aspect of Greece’s budget cuts. The pressure was on; the OECD had just warned that the E.U. go back into recession. Interest rates on state debt-namely that of Spain—had reached an unsustainable level the week before due to concern regarding banks based in the state. Besides the debt and banking vulnerabilities at the state level, the E.U. itself was struggling with its political weakness, which can be attributed to the states’ rights (or euro-skeptic) ideology that was not exactly going away in the context of the debt-contagion that had prompted the establishment of a permanent E.U. bailout fund for states in over their heads on debt. In this context, the European Council was at the intersection of debt, banking and political problems.

The full essay is at Essays on the E.U. Political Economy, available in print and as an ebook at Amazon.

Facebook’s IPO: Morgan Stanley’s Conflict of Interest

Morgan Stanley’s underwriting of Facebook’s IPO has been thought by some of the bank’s rivals to be incompetently managed.  According to the New York Times, “(r)ival bankers and big investors have complained that Morgan Stanley botched the I.P.O., setting the price too high and selling too many shares to the public.”[1] Interestingly, the incompetence is positively correlated with unethical policy decisions at the bank. Even as the bankers as underwriters were eager to sell lots of shares, they may have given some of their institutional customers—albeit only the most preferred, as per the bank’s other services—some privileged information. If this charge is true, the conflict of interest at the bank should be closely examined by Congress and any relevant regulators.

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

1. Evelyn Rusli and Michael De La Merced, “Facebook I.P.O. Raises Regulatory Concerns,” The New York Times, May 22, 2012.

Wealth and Happiness American-Style

The Organization for Economic Cooperation and Development released an up-dated version of its Better Life Index in May 2012. The U.S. ranked first in income, with average household wealth at $102,000, as well as in housing (Americans spending about 20% of their disposable income on it—the OECD average being 22%).[1] These figures for the U.S. could have been pushed upward by the fact that at the time, the very rich were richer than their counterparts in other countries, for the gap between rich and poor was relatively high in the U.S. For example, 30 million Americans were without health insurance and a record number of Americans were receiving a governmental subsidy for food. Rather than assume that the middle and lower economic segments in the U.S. were better off than their counterparts in other regions of the world, I suspect that the statistics reflect the higher relative pay of American executives and professionals (lawyers, physicians and CPAs). The typical CEO in the E.U., for example, made less than his or her counterpart in the U.S.  This caused trouble in the Chrysler-Daimler merger because the Chrysler executives enjoyed higher compensation even though Daimler was in charge.

The full essay is at "Wealth and Happiness."

1. “OECD LaunchesUpdated Version of Your Better Life Index,” OECD. 

The Huffington Post Gilds the Lily: Facebook’s IPO Plummets?

On the day of its IPO, Facebook issued at $38 and went to a high of $45 before returning to near its issue price (closing at $38.23). On the next trading day, the price fell to about $34 in the early afternoon. This represents about 10% off the issue price. The Huffington Post headlined “Stock Plummets,” which must have been irresistible to anyone who had bought the stock. The Huff was using the $45 high as its benchmark, from which the $34 price represents a 25% drop. As if that were a plummeting, using the 10% off figure would have made the self-aggrandizing headline too obvious. At the very least, the headline detracts from the credibility of the Huffington Post.

The full essay is at "Taking the Face Off Facebook."

"Real Change" Belied: Lobbyists in Obama's White House

Visitor logs for January 17, 2012 show that the lobbying industry that Obama had vowed to constrain was nonetheless a regular presence at 1600 Pennsylvania Ave.[1] That's the address of the White House. Even though the president barred recent lobbyists from joining his administration or even serving on its advisory boards and forbid federal employees from accepting free admission to receptions and conferences sponsored by lobbying groups, records suggest that lobbyists with personal connections to the White House enjoyed the easiest access. The principle of fairness (not to mention consistency) seems to have been sacrificed for political (and campaign finance) expediency.

The full essay is at "'Real Change' Belied."

1. T. W. Farnam, “White House Visitor Logs Provide Window into Lobbying Industry, The Washington Post, May 21, 2012.

Unions and States at a G-8 Meeting

At the G-8 summit at Camp David in May 2012, E.U. and U.S. leaders met with the leaders of four E.U. states (Italy, Germany, France and Britain). As this picture illustrates, the qualitative differences between looking after a union of states and a state can show up unintentionally in informal seating arrangements. In the context of the European debt crisis—in particular, whether to give one state (i.e., Greece) stimulus cash or just insist on the austerity programs already agreed to—the governors of the E.U. states have particular agendas (given the financial interests of the respective states) whereas the federal officials are oriented to the good of the whole (i.e., the E.U.). President Obama of the U.S. was by the time of the summit used to taking such a perspective over and above the interests of particular U.S. states. Such a commonality of federal, empire-level interests as distinct from the relatively particularized interests of E.U. (and U.S.) states could be reflected in the seating arrangement in the picture taken by the White House, wherein Obama, Barroso (sitting next to Obama), and Van Rompuy (in the sweater) seem to be facing the four governors. The seating arrangement could just as easily have been a circle. It probably was, originally, and I suspect that the federal v. states distinction operated unconsciously on the participants such that the three federal officials came to be as though a line facing the four governors of E.U. states.

The complete essay is at Essays on Two Federal Empires, available at Amazon.