EconomicCrisis.US

Global imbalances — roughly defined, the different emphasis the world’s leading economies place on savings, spending and debt — is a phrase much used and little acted upon.

Well before the current financial crisis began, world leaders pledged to address this disconnect. At an International Monetary Fund meeting in 2007, for instance, representatives of the United States and the European Union agreed they should change economic incentives to encourage more savings and less spending; officials speaking for China, Japan and Germany, meanwhile, pledged to take steps to encourage spending. At the end of the day, nothing much happened, and these imbalances helped grease the skids for the global decent toward the economic abyss.
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U.S. policy makers should require that investors and creditors absorb losses when financial companies fail and strengthen rules to reduce systemic risk at the largest firms, the regulator of national banks said Monday.

“You have to take measures that will make it less likely that the largest firms have the kind of systemic risk that puts them into a situation where you have to choose between protecting them or putting the system at risk,” Comptroller of the Currency John Dugan told reporters at the American Bankers Association convention.

Dugan urged policy changes to the process for winding down failed financial firms that would “make it far more likely that equity holders and creditors sustain losses.”
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The financial crisis is now more than a year old, and Americans are still angry — angry that the economy tanked, angry that they’re out of work. But mostly, people seem outraged by Wall Street bonuses.

Seeking to assuage that ire, the Obama administration’s “compensation czar,” Kenneth Feinberg, last week announced plans to cut the pay of top executives at the seven companies receiving federal support. He has suggested that the cuts, which slashed pay for top executives by an average of 50 percent, should be a model for the rest of Wall Street and corporate America.

In outlining the change, Feinberg has had to grapple with several misconceptions about Wall Street bonuses.
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Regional economic reports on Monday suggested the U.S. economy has clambered back to levels associated with the end of recession, but recovery will be patchy and may prove fleeting.

Economic activity and manufacturing data for the U.S. Mid West and Texas hinted the impact of the global financial crisis is slowly abating as the economy emerges from the longest recession in 70 years.

However, an index of national economic activity slipped on a monthly basis and a Texas manufacturing output index fell.

“Those kind of reports tend to support the argument that this recovery will be more uneven and less V-shaped, but with the caveat that these are somewhat narrow regional surveys,” said Kevin Flanagan, fixed-income strategist for global wealth management with Morgan Stanley in Purchase, New York.
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