March (Economic) Madness

Thursday, March 19, 2009

Simon Johnson, former chief economist of the International Monetary Fund, professor at the MIT Sloan School of Management, senior fellow at the Peterson Institute for International Economics and co-founder of The Baseline Scenario blog, focuses on a different facet of the economic crisis each week in March. This week: What's a bonus? Why can't the world agree on a stimulus approach? And China's link to US debt.


Simon Johnson

Comments [31]

Jon P. from Hewitt, NJ

I agree hjs from 11211

Mar. 19 2009 12:54 PM
hjs from 11211

jon p
true and there's going to be enough pain to go around for a long time. but i don't think the USA is ready to start paying the piper.

Mar. 19 2009 12:12 PM
Sven R. from NYC

Something struck me after the Dec 31 08 date was mentioned...

If those AIG bonuses were retention bonuses, then when were these people informed/prompted to be retained? Was there a reason they needed to stick around until the Obama presidency?

By the way, the whole uproar about the bonuses is a fraud/red herring. The true scandal is paying the full value of the contracts to DB, SocGen and last but not least... JPM. This could have easily been negotiated down to 80cts on the dollar, or perhaps even 20.

Mar. 19 2009 11:52 AM
Jon P. from Hewitt, NJ

Hi hjs from 11211,

I know we started it but these banks got just as greedy making risky investments for easy money as we did. Are they not responsible for adding much fuel to the fire? The world’s wealth doubled in the last couple of years after not budging for decades. We should have questioned why so much so quick. But shouldn’t the rest of the world that was getting fat dumb and happy like us should have also as urgently questioned why so much wealth was being made so quickly?

Mar. 19 2009 11:40 AM
Marlon Ziello from brooklyn

There is no news organization with enough courage to truthfully explore the federal reserve not even one thats funded by the people.

Mar. 19 2009 11:34 AM
hjs from 11211

jon p
the problem started with our mcmansions that the buyers could not afford!

Mar. 19 2009 11:32 AM
markbnj from

last comment/idea: (all from my blog)


All US corporations will adopt a new policy of CEO payment of no more then Twenty times the minimum salary of their least paid employee (or contractor-in case of a janitor!)

To rein in run-away salaries.

Also: to enforce, the tax code can be reworked to tax at 150% any corporation that DO offer salaries of more then 20 times these salaries.

Mar. 19 2009 11:31 AM
Susan from Kingston, New York

Jamie Diamond has been one of the only CEO's of a bank that has been responsible.....

Mar. 19 2009 11:31 AM
Susan from Kingston, New York

This guy is talking off the top of head!

Mar. 19 2009 11:30 AM
Jon P. from Hewitt, NJ

How is it that France and Germany say the financial mess is completely our problem yet it was just reviled that AIG paid out several billion dollars to both French and German banks?

Mar. 19 2009 11:28 AM
Marlon Ziello from brooklyn

Banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.
Thomas Jefferson

Mar. 19 2009 11:26 AM
D from Summit, NJ

In response to the last caller, mortgage rates fell as recently as yesterday afternoon. Bank of America quoted a rate of 4.875 on a 30 year fixed with no points down. The rates are considerably lower than they were two years ago.

Mar. 19 2009 11:25 AM
Marlon Ziello from brooklyn

This is inflation and the poor will feel it first while wall st gets richer look at the TAO and then the cost of a barrel of oil who makes money and who loses. The fed is the root of all this country's problems.

Mar. 19 2009 11:23 AM
Ekmel from NYC

Question for Prof. Johnson: could the US Treasury have outsourced the winding down the book of business of AIG Financial Products to an unconflicted, 3rd party (Blackrock or a few other asset managers come to mind) at A FRACTION of the cost of the $165m retention bonus pool? The outsourced asset manager would manage and execute the unwinding, Treasury can monitor the results.

Mar. 19 2009 11:21 AM
Karen from Westchester

would your guest pls speak to Martin Wolf's point in the book Fixing Global Finance, the excess of savings in emerging markets and their re-cycling of capital in the form of holding huge foreign reserves. (Wolf thinks they need to invest at home).

Mar. 19 2009 11:20 AM
markbnj from

Simon: please comment on this idea"

a "MMT" new Minimum milionaire's tax:
a Minimum tax based on one percent (mini,mum) tax of a person's GROSS income (kicks in at 1M of GROSS income (for both individuals AND corporations)

This will allow people to pay taxes NO matter what their dedcutions ARE:

Mar. 19 2009 11:20 AM
Sinohe Terrero from brooklyn

I still disagree with the guest that the Fed is in any way a part of the Govt.

The owners of the Fed are the banks - they own shares of the bank. The Govt doesn't even have the power to audit the fed.

Mar. 19 2009 11:20 AM
osho from ny

If other economies decide to increase their own money supplies, wouldn't that somewhat mitigate the decline of the dollar?

Mar. 19 2009 11:19 AM
KC from NYC


From that bastion of progressive thought, The Wall Street Journal:

"The most stringent pay restriction bars any company receiving funds from paying top earners bonuses equal to more than one-third of their total annual compensation. That could severely crimp pay packages at big banks, where top officials commonly get relatively modest salaries but often huge bonuses.

As word spread Friday about the new and retroactive limit -- inserted by Democratic Sen. Christopher Dodd of Connecticut -- so did consternation on Wall Street and in the Obama administration, which opposed it."
6186405.html?mod=testMod [subscription required]

Mar. 19 2009 11:18 AM
bruce from brooklyn

The Federal Reserve is STILL a private bank. Dont be mistaken. Your guest is dancing around the question of how it is "part of the government"

Mar. 19 2009 11:16 AM

Please explain why they wouldn't have a clause saying that the stimulus money can't be used for bonuses. Call me naive, but I don't get it. no really, i don't.

Mar. 19 2009 11:16 AM
Leo from Queens

Longstreet. There you go again!. The Republicans several weeks ago were railing against ANY legislation that would restrict compensation and bonuses for executives from companies receiving tarp money. Now all of a sudden they are complaining that the restrictions were not strong enough..
Which is it? You guys need to have some 'principles'. If you don't know what it is look it up in a dictionary.

Mar. 19 2009 11:14 AM
markbnj from

Please ask Simon why he thinks we're NOT in a depression today.

And ask him what he thinks of the idea of the US government taking over the car companies, so that we save the jobs and refocus the companies on GREEN manufacturing (like light transit/rail) and other green stuff.

Mar. 19 2009 11:14 AM
Alex from Brooklyn

But congress has not oversight over the fed, even though it has that authority... The fed is not audited. this guy is a tool.

Mar. 19 2009 11:13 AM
JT from NYC

I thought the Federal Reserve was a private bank?

Mar. 19 2009 11:12 AM
Alex from Brooklyn

The Fed is not a branch of the government. It's a private institution.

Mar. 19 2009 11:12 AM
Marlon Ziello from brooklyn

The Federal Reserve Is not A government agengncy

Mar. 19 2009 11:10 AM
KC from NYC

Oh cool! The Dodd attack! That's stuff's hilarious; keep it up, gullible.

Mar. 19 2009 11:07 AM
longstreet from NYC area

Let's get Chris Dodd on to talk about what is/is not a bonus. From what I've seen he's an authority on the subject and would never dream of lying, either.
Wake up, lefties. It's not too late.

Mar. 19 2009 11:01 AM
KC from NYC

Hey, Simon Johnson--good guest. Bring on Dean Baker or Michael Hudson, too, and I might start having a lot more confidence in public broadcasting's economic coverage.

Mar. 19 2009 10:36 AM

So who gamed the bailout package wording to include so-called bonuses before it was passed?

Joseph Cassano's donation list:

(a link)

That was hard.

Mar. 19 2009 10:04 AM

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