This story on the New York Times site provides some great information on the absurd largesse of Wall Street’s mortgage-sector paydays, while revealing some of the oddities of the Times’ style. It’s teased on the home page thusly: “As regulators sift through the rubble of the financial crisis, questions are being asked about what role lavish bonuses played in the debacle.”
Gee, d’ya think ginormous bonuses based on short-term profits might have skewed the incentives and made the financial whizzes too eager to take on risk? What might the answers to those questions be?
The article also offers this interesting tidbit:
For now, most banks are looking forward rather than backward. Morgan Stanley and UBS are attaching new strings to bonuses, allowing them to pull back part of workers’ payouts if they turn out to have been based on illusory profits. Those policies, had they been in place in recent years, might have clawed back hundreds of millions of dollars of compensation paid out in 2006 to employees at all levels, including senior executives who are still at those banks.
It’ll be interesting to see how the companies fare if they actually try to pull back cash from their employees in the future. As the story makes clear, bonuses account for the lion’s share of compensation for a very large number of workers at these firms. It’s hard to imagine that much of that money will be recoverable once it’s paid out.
Which is the whole problem, of course. The best move for the future would be not to rescind bonuses that turn out to be based on fake profits, but to develop a compensation structure that’s not so geared toward profit-based bonuses in the first place.
Much of the talk about liberal anger over Barack Obama’s Cabinet choices has been overblown, but with his two latest picks it sure feels as though Obama is indulging in some ostentatious prudence or moderation. Ken Salazar at Interior and Tom Vilsack at Agriculture are obvious choices — prominent, uncontroversial Democrats from regions that are disproportionately affected by the portfolios they’ll be taking on. That means they’re versed in the issues, but unlikely to support sweeping change; you don’t get to be governor of Iowa by announcing you want to take a hatchet to farm subsidies. This Washington Post story found some left-leaning advocacy types to say nice things about both picks, but supporters of more liberal options — such as Raul Grijalva for Interior and any number of people for Agriculture — must be disappointed.
The standard response to these concerns is that Obama will be setting policy, and he needs experienced people in his Cabinet to implement it. Obama pretty much made that case about Salazar, noting he was looking for someone to clean up the scandal-plagued Dept. of Interior. But that makes more sense when it comes to foreign and economic policy than areas which historically get overlooked by the White House. There’s also reason to be squeamish about Obama’s own policy preferences on agricultural issues, such as his history of support for corn-based ethanol, which he reinforced at today’s press conference by saying Vilsack “understands that the solution to our energy crisis will be found not in oil fields abroad but in our farm fields here at home.”
Until the president-elect and his picks actually take office and start governing, it’s probably best not to draw too many conclusions. But these are a couple spots where Obama’s liberal supporters will be looking closely for the change they believed in.
Pro Publica and the New York Times have gotten hold of an unpublished federal history chronicling the problems plaguing the U.S. reconstruction effort in Iraq. I haven’t yet plowed through the entire 513-page report (available here in draft form on the Times’ Web site), but while the concluding “Lessons Learned” section reads like a greatest hits compilation of Bush-era wrong-headedness, it leaves out perhaps the most important lesson of all: Don’t try to reconstruct a nation whose people don’t want you there.
The history’s authors catalogue the many errors made by the U.S.: de-Ba’athification and the disbanding of the Iraqi military, commitment of too few American troops, non-existent coordination between military and civilian agencies, haphazard careering between wildly different strategies, an ideological commitment to “private-sector” solutions, and a complete lack of understanding of Iraqi political realities. The report also emphasizes just how hard reconstruction (read: nation-building) really is even when done right, and it offers recommendations for improving administrative structures and shifting the balance from military to civilian power. But it somehow creates the impression that the key obstacle in Iraq – terrifyingly high levels of violence, or, in the report’s terms, the lack of a “permissive” environment – was somehow unrelated to the fact of the reconstruction effort itself.
Of course, the reconstruction only occurred because of the invasion – and the invasion created circumstances that made the reconstruction almost impossible. As Matt Yglesias and Sam Rosenfeld put it three years ago, “to initiate a war in order to begin the occupation is daft.” Especially when you simply don’t have enough people to do the war, or the reconstruction, properly.
With the U.S. presence in Iraq about to begin winding down, the history’s immediate purpose seems to be to shape policy in Afghanistan. There, its call “for the US government to reform its approach to contingency relief and reconstruction operations and to develop greater capacity to carry them out” actually makes some sense, though recent events show we are very much not in the “post-conflict” stage in Afghanistan, either. And there will be other instances when the U.S. – in concert with the international community – can take on reconstruction efforts that do some good. But it would be nice, while we’re setting out to develop greater capacity, to do some more thinking about when to use it and why we want it.