EconomicCrisis.US

The Obama administration has announced the formation of a new task force to target financial fraud. It replaces an earlier corporate fraud unit created in 2002 by the Bush administration following a series of corporate scandals. Attorney General Eric Holder says the new group will have a broader scope, and be able to provide better coordination among federal and state agencies that investigate and prosecute financial crimes.

The Obama administration is pledging a more aggressive effort to prosecute and discourage financial fraud. U.S. Attorney General Eric Holder, who will lead the task force, says fraud has caused hardship for thousands of Americans and contributed to the worst financial crisis in decades.
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Historically, the U.S. stock market has been one of the key leading indicators of a U.S. economic rebound.

With the Standard & Poor’s 500 Index up more than 60% from its March lows – and the Dow Jones Industrial Average up nearly 40% – prognosticators are finally confident that the U.S. economy will dodge the “double-dip” recession that has been the focus of much fear since the Bush and Obama administrations launched their financial counterattacks on the worst financial crisis since the Great Depression.

But those same forecasters are reluctant to forecast a sharp economic rebound for 2010. In fact, as opposed to a classic “V-shaped” economic recovery that would accelerate as the year goes on, many economists are predicting that the rate of growth will slow as the New Year unfolds.
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When Nouriel Roubini talks, the world listens. Roubini is, of course, the once-obscure New York University economist whose dire warnings about a financial crisis proved depressingly prophetic. Last week, Roubini was shouting. Writing in the Financial Times, he warned that the Federal Reserve and other government central banks are fueling a massive new asset “bubble” that — while not in imminent danger of bursting — will someday do so with calamitous consequences.

Here is Roubini’s argument: The Fed is holding short-term interest rates near zero. Investors and speculators borrow dollars cheaply and use them to buy various assets — stocks, bonds, gold, oil, minerals, foreign currencies. Prices rise. Huge profits can be made.
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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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