September 19, 2008

The federal goverment’s proposal for a bailout of the financial industry sounded somewhat familiar to me.  I remembered that I had blogged about a similar proposal about a year ago on Conglomerate.

Robert Kuttner of the Boston Globe was advancing a plan to create a federal agency to buy up troubled mortgages and renegotiate them so that those who could afford it would be able to stay in their homes. The proposal was modeled on the New Deal’s Home Owners Loan Corporation. I thought it was a proposal that merited attention. Many of Conglomerate’s commenters thought otherwise, and condemned the idea as a bailout of greedy, irresponsible homeowners and/or investors.

Without commenting on the merits of the specific proposal that Kuttner advanced (I am sure it had some flaws), I cannot help but think that we could have forestalled the current crisis if government leaders had come together to address the problems when they surfaced at the consumer end.


What a Difference a Year Makes

September 17, 2008

One year ago discussions surrounding corporate law policy were driven by the Sarbanes-Oxley ‘backlash.”  The Paulson Committee and others were warning about how excessive regulation and litigation would lead to the ruin of Wall Street.  Turns out that Wall Street was eminently capable of ruining itself.

Now politicians on both side of the aisle are pushing the need for more regulation, and railing against greed, excessive salaries and golden parachutes.  Seems we are all populists now (at least for the next 50 days).  It will be interesting to see if the current crisis leads to a short term flurry of reforms of the type that followed the 2001 accounting scandals or to a more rigorous rethinking of how we regulate financial markets and corporate governance.  Let’s hope for the latter.