Wage Controls for Wall Street?

Wage controls
for wall street

gift hub

Obama expressed outrage earlier this week after the New York state comptroller reported that Wall Street firms disbursed $18.4 billion in bonuses last year as the U.S. sank into a recession. While the figure represents a 44 percent decline from the previous year amid record losses in the securities industry, the bonus pool was the sixth-largest ever, the comptroller said in a yearly report. [bloomberg]

Politicians make low salaries but make up the difference with graft, and with revolving door jobs before and after taking office. Are we suggesting that Wall Street should work the same way, on the take and off the books? Or should the firms that take bailout money pay lower compensation than those who did not get bailed out? Will that lead to a brain drain from the bailed out companies? And if the loss of brains leads to a less efficient firm, will we bail the dummies out again? Seems that the only real solutions are systemic. Maybe a year of unpaid job corp service for every year an executive makes more than one million? Make philanthropy mandatory at a 55% rate above one million a year in compensation? Wage Controls for Wall Street?
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Best bipartisan buddies: Sarah Palin and Barack Obama

Sarah Palin
Barrack Obama

Los Angeles Times, CA
January 30 2009

While most everyone was watching the attempted bipartisanship on Capitol Hill this week, some of it broke out successfully in an unlikely place elsewhere.

It seems that Alaska Republican Gov. Sarah Palin, the unsuccessful GOP VP nominee, was worried that the Army was going to cut off pensions to the state's old-timers long-retired from the Alaska Territorial Guard. So she sat down and wrote a letter to the new big guy himself, Democratic President Barack Obama, who's vowed to take extra special care of veterans.

And the largest state's small congressional delegation got involved too.

And, what do you know? According to the ever-vigiliant Sarah Palin for President blog, the Army suddenly decided it didn't really need to cut off those payments after all

It found a special fund to pay them, while Sens. Lisa Murkowski, a Republican, and Mark Begich, a Democrat, together shepherd the proper authorizing legislation through Congress.

Amazing when it works.

And speaking of Sarah and Barack, this weekend they're both attending the off-the-record black tie dinner of the Alfalfa Club, one of those fraternity-like get-togethers that Washingtonians schedule throughout the year to convince themselves of their eliteness. Palin, who as The Ticket reported, formed her own SarahPAC this week, says she's attending to pitch the interests of Alaska.

And?

According to Paul Bedard over at Washington Whispers, Palin's presence in D.C. has sparked an interview bidding war between CNN's Larry King, who's had seven wives and almost as many heart attacks, and ABC's George Stephanopoulos, who hasn't.

--Andrew Malcolm

Speaking of bipartisan, members of all parties can register here for Twitter alerts on each new Ticket item? RSS feeds are also available here. And we're on Amazon's Kindle now as well.

Photo credit: Vogue

Japan may help U.S. if China stops debt purchase

Japan may help U.S.
if China stops debt purchase

By Nick Olivari

guardian.co.uk
Reuters,
Tuesday January 27 2009

NEW YORK, Jan 27 (Reuters) - Japan could be a counterweight against rising U.S. borrowing costs should China buy less U.S. government debt in response to pressure from Washington to change its currency policy.

Investors are on full alert that Japan's Ministry of Finance could buy dollars to bring the yen down from a 13-1/2- year peak first touched in December and hit again in January.

Japan, which relies heavily on trade to power its economy, saw its exports plunge 35 percent in December.

Already holding $1.03 trillion in official reserve assets, according to International Monetary Fund data, the next question is what would Japan do with intervention dollars.

Given Japan is the second-biggest holder of U.S. debt after China, it would likely buy Treasuries, denting some of the impact if Beijing hits back over recent foreign-exchange criticism by Timothy Geithner, now Treasury secretary.

"Japan gets a higher dollar/yen rate and keeps the domestic exporters happy while the increased supply of U.S. debt and specifically Treasuries gets mopped up," said Dustin Reid, senior currency strategist at RBS Global Banking & Markets, in Chicago.

The U.S. government "could issue a lot more debt and it is no secret that Japan wants its currency to weaken," Reid said.

Prices of U.S. Treasury bonds fell last week, partly on concerns that Geithner's comments, made in testimony to senators weighing his nomination as Treasury secretary, could provoke China into buying less U.S. debt.

But there was no sign of weaker foreign demand at a $40 billion auction of two-year Treasury notes on Tuesday.

JAPAN'S INCENTIVE

Foreign central banks and individuals hold more than half of the $5.8 trillion in outstanding U.S. government debt. China and Japan hold about a quarter of the total amount.

China edged out Japan as the biggest holder of U.S. debt in 2008 after years of recycling the money they received from U.S. consumers for exports by buying Treasuries. That began a cycle of keeping the U.S. consumer at the mall on cheap loans.

Amid the global downturn, Japan has no less incentive to keep its factories running.

With the U.S. government set to issue some $2 trillion of debt in 2009 alone in order to fund a stimulus package to revive the economy, Washington is keen to see buyers.

"Intervention by Japan would probably result in increased purchases of U.S. debt," said Omer Esiner, senior market analyst at Ruesch International in Washington.

"Any decrease in demand for U.S. debt by China that is offset by Japan would be good for the U.S. economy."

Shortly before Geithner won confirmation as U.S. Treasury secretary on Monday, the White House hedged his statement last week -- that President Barack Obama believed China was manipulating its currency -- by saying a formal decision on the issue would be made in coming months.

The fear, though, is that this could be an opening salvo in a more confrontational relationship between the United States and China.

China has denied the currency manipulation charge, but IMF Managing Director Dominique Strauss-Kahn said on Monday the yuan was "significantly undervalued."

YUAN VS YEN

In the first three years after China let it begin to appreciate in July 2005 in response to long criticism from U.S. lawmakers, the yuan gained around 18 percent against the U.S. currency, including the initial revaluation.

But today, it is trading at 6.83 yuan to the dollar, kept by Chinese authorities at roughly where it was in July 2008.

At those levels, China has sold vastly more goods to the United States than the latter has sold to China. While China does have a cheap labor force, its trade advantage over other low-cost producers is bolstered by the exchange rate.

Between January and November 2008, the United States ran a trade gap with China of $246.45 billion, according to U.S. data, after a $256.2 billion deficit in 2007 as a a whole.

By contrast, the U.S. deficit with Japan was $67.39 billion for the first 11 months of 2008, after an $82.76 billion deficit in 2007. The freely floated yen last traded around 89.50 yen to the dollar.

Intervention by Japan's Ministry of Finance to weaken the yen by buying dollars could also be considered a "manipulation" of the currency, but Washington will point no fingers there, given the fundamentally different relationship with Japan.

"Japan does have a floating currency and they never (intervene) without alerting the Fed," said Peter Zeihan, vice president of analysis at Stratfor, an Austin, Texas-based global intelligence company. "Independent of that, Japan is an ally."

To be sure, whether the United States and China clash outright is still open to debate, as is whether Japan would even be able to press an advantage.

While Japan would probably like the dollar/yen rate to be above 100 instead of the current 89.14, the impact of China not buying U.S. Treasuries or moving reserves into other currencies could overwhelm any other actions, said Joseph Trevisani, chief market analyst at Saddle River, New-Jersey based FX Solutions.

"I'm not sure we would get the type of logical follow-up effects because of the turmoil," Trevisani said. "Fear for the U.S. economy could overwhelm the dollar and it would fall." (Reporting by Nick Olivari; Editing by Jan Paschal)

[Japan may help US if China stops debt purchase
guardian.co.uk, UK]