Felix Salmon

Remember the famous 2002 debate between Joe Stiglitz and Ken Rogoff? Well, they seem to be in agreement with each other now — World Bank, Reuters 1, Reuters 2

5 Myths about America’s Credit Card Debt — WaPo

“Books are, within reasonable limits, demand-inelastic” — TBM

Cost Dispute Halts Airlift of Injured Haiti Quake Victims — NYT

Amazon buys ebooks from publishers at $10-$14 wholesale, says Blodget — SAI

Treasury Removes Embarrassing Line From Mortgage Modification Report — Atlantic

Somali Pirates Plan to Send Treasures Taken from Rich Countries to Haiti — Racewire

iPad v. A Rock — TechCrunch

Brad Tuttle is even more defeatist than me when it comes to regulating credit cards — Time

Me, on Ingrassia and Maynard, in the NYT Book Review — NYT

Modern art is rubbish — BBC

We Have Seen The Amazing Future Of Apple’s iPad And This Is It — SAI

You didn’t buy back your stock at $50, so why are you buying it now at $125? — 24/7 Wall St

Beautiful visualization of fonts and ink — Flowing Data

Smart take by Sean Park on why the VC world ignores finance in favor of tech — Park Paradigm

Rather than face reality and open their books, Dubai and Sheikh Mohammed Al Maktoum tell S&P to get stuffed — Ian Fraser

Zero Hedge thinks that Morgan Stanley’s research is excellent. So they pass it off as their own — Davian

You thought bank PRs were bad about forcing hacks to “check quotes” etc? Just check out the PRs for UK C-list celebs! — 3am

How To Report The News on TV — YouTube

The big meeting this morning between global bankers and regulators is exactly the meeting I was hoping would happen. A large group of bold-face names such as Larry Summers, Brian Moynihan, Alistair Darling, and Mario Draghi, meeting behind closed doors, reportedly came to the obvious yet necessary conclusion that, in the words of Darling, “we are agreed that whatever we do, it needs to be universal. You’re dealing with a global banking system. You need a common approach across the world”. And some good news is slowly emerging: already regulators and banks seem to be coalescing around the need to create a wind-down fund which would allow the orderly resolution of insolvent banks.

It’s easy to say such things, of course: the difficulty is in the international coordination needed to enact them. At the panel on financial regulatory reform today, everybody was at pains to say that every country is different and therefore needs its own custom-built regulatory regime: all we’re really talking about here is something called “regulatory consistency”, which, if the stars align correctly, might hopefully cut off most of the opportunities for banks to engage in regulatory arbitrage.

Yeah, me neither.

Still, a few interesting ideas did emerge. I particularly like the idea that no banks should be allowed to have branches in foreign countries: if you want to set up abroad, you need to have fully-fledged subsidiaries in each company, regulated domestically as if they were domestic banks.

This would have a lot of good consequences. For one thing, it would prevent problems such as those we’ve seen in Switzerland, Iceland, and the UK, where bank assets are enormous multiples of GDP, and consequently bank bailouts can be fiscally disastrous. It’s worth noting that Kaupthing had a subsidiary in Germany, while Landsbanki had branches in the UK; the result is that now the Icelandic government owes enormous sums of money to the UK, and nothing to Germany.

There’s also the Mexico problem, which is true in many other emerging markets as well: the Mexican banking sector is dominated by three foreign banks, all of which are too big to fail in their home country. Should their Mexican subsidiaries be forced to have high capital ratios and low leverage just by dint of the size of the parent company? What will that mean for the availability of credit in Mexico? Perhaps if those subsidiaries were truly answerable to the Mexican regulatory authorities, that might help matters. And it would also help fix the Walmex problem: Walmart has banking operations in Mexico, but it isn’t allowed to do that in the US, and isn’t regulated as a bank in the US. Which means that there really isn’t an ultimate bank regulator for Walmart’s Mexican banking subsidiary.

The star of the panel, however, was Davide Serra, the principal of a UK hedge fund named Algebris. He’s caused quite a splash at Davos in 2010, and seems to have built some very strong connections with high-level policymakers in the official sector. He said that if you have 2,800 people at the Financial Services Agency in the UK trying to regulate 1 million better-paid financial-sector employees, that’s “like trying to regulate a Ferrari with a skateboard”. And he also said, quite rightly, that it’s possible to focus far too much on capital ratios: after all, insolvent banks can continue more or less indefinitely, while a bank facing a liquidity crunch can collapse within a day.

Serra noted that the US, with its six different bank regulators, was “a disaster”, and that the UK, with its three regulators, wasn’t much better; the countries which navigated the crisis most effectively had only one regulator. And he had a provocative idea about who that one regulator should be, saying that it should be given, every five years, to the most admired and successful bank CEO of the time. It’s an idea which won’t ever happen, but it does make a certain amount of counterintuitive sense when you start to think about it.

Ultimately, I doubt that the World Economic Forum has really made any difference to the global regulatory agenda, or to the US decision to chart its own course with things like the Volcker Rule rather than try to engineer international consensus. But if it has made a difference, I think it’s done so by forcing the banks to face reality and start making constructive noises about helping to build a new global regulatory regime, rather than simply fighting any proposed rules which might crimp their risk-taking. A world where Barney Frank and Gary Cohn can agree is a world with some hope left in it.

Justin Wolfers wonders about what he sees as an economics-reporting arbitrage: given this chart, he says, why aren’t editors and reporters doing a better job of moving resources into economics reporting?

Justin’s list of possible reasons is a good one; I’d add a couple more.

Firstly, the question asks not about what Americans think of reporting on the economy, but rather what Americans think about the reporting on policies and practices of the Obama administration as they relate to the economy. Historically, reporters who understand economics and finance have generally been in New York rather than Washington — while the Wars and Terrorism reporters have been in Washington all along. But if you’re reporting on the Obama administration’s economic policies, you need to be in DC. The move to DC is happening, but it’s maybe not happening as quickly as the public would like.

Secondly, the simple fact is that the Obama administration has been much less good at communicating its economic policy than it has been at communicating its policies on other matters. Tim Geithner is not a great communicator, and the administration’s economic policy in general is very complex: it’s hard to reduce it to a simple choice like “Afghanistan: stay or go”, or “Healthcare: should there be a public option or not”.

More generally, I think the answer to the question is simply a function not of the quality of reporting on the economy, but just of the degree of confusion and anger that Americans have when they look at what has happened over the course of the Great Recession. That’s something that the news media can attempt to address, but it’s a very tough job, and they’re certain to fail with a large amount of Americans a large amount of the time. For all we know, this 40% figure is actually much lower than might be expected given the depth and complexity of the recession.

Still, I hope that the news media will use the results of this poll to increase the quantity and quality of their economic reporting. Right now, you can never have too much.

Every so often at Davos you have a short, startling conversation which completely changes the way you think about a subject — and I just had one of those standing next to Dan Barber, the chef of Blue Hill Farm. He’s a very smart, very funny guy, who’s passionate about food on every level from preparing the ingredients of the dishes in his restaurants to the logistics of feeding the planet.

I bumped into Barber as we were milling around the Davos conference center, waiting for the panel on “rethinking how to feed the world” to begin. I asked him what he thought of the food in Switzerland; he compared in unfavorably to what he was fed by the airline on the way over here. “I haven’t seen a vegetable since Thursday,” he added, looking a bit overwhelmed by the number of things that the Swiss seem to be able to do with bread, cheese, and bit of veal.

When the panel started, I could almost see the steam coming out of Barber’s ears. It featured two heads of state; two agribusiness CEOs; a representative from the World Bank; and Bill Gates. All of them looked at food mainly as a matter of logistics and problem-solving, and they seemed to do so with real good will and good motives. (Well, maybe not the CEO of ADM.) But they were all very much bought into a model which looks, to Barber’s eyes, incredibly shaky.

Essentially the problem is that the people on the panel have internalized the principles of comparative advantage and free trade to the point at which they are more or less incapable of thinking any other way. In a Ricardian world it makes sense for Ohio to overwhelmingly grow corn and soy, since growing corn and soy is what it does best. And because of economies of scale, it makes sense to grow just one type of each, on farms of mind-boggling size. Ohio can then trade all that corn and soy for the food it wants to eat, and everybody is better off.

Except in reality it doesn’t work like that. Monocultures are naturally prone to disastrous outbreaks of disease, which can wipe out an entire crop. The panel at Davos has a favored method of dealing with such things: the development of disease-resistant crop strains, often through high-tech and patentable genetic modification. Bright research scientists create clever transgenic crops, and then people like Bill Gates and the World Bank try to get them broadly adopted while setting well-intentioned staffers to work minimizing potential problems with IP licensing. Innovation through agricultural technology is the obvious and necessary solution to the problem of global hunger.

Barber isn’t anti-science, nor is he anti-innovation. But he knows (and the panelists know too) that a system of globalized agriculture can break down, as we saw during the commodity boom of 2008. As the price of soy and rice and wheat soared, exporters started hoarding rather than selling, and importers couldn’t obtain necessary supplies at any price. As the World Bank’s Ngozi Okonjo-Iweala noted, Ukraine had 5 million tons of surplus wheat, but the international food markets were very thin, and it was extremely difficult to get that wheat exported. The system didn’t work like it was meant to: when put to a real-world test, it broke down.

Problems associated with monocultures can pop up even when there isn’t a commodity-price bubble, too: look, for instance, at the tomato plight which devastated the northeast US last year. Barber explains clearly what happened: millions of more-or-less identical starter plants were transported across the US by huge corporations like Home Depot and Wal-Mart which have neither the inclination nor the ability to notice when the plants are showing signs of blight. Those starters, planted by enthusiastic amateurs across the nation, then started “transferring their pathogens like tiny Trojan horses” into the local biosphere.

The solution to this problem, in Barber’s view, is indeed disease-resistant plants, but not in the sense that a company like DuPont thinks of such things.

To many advocates of sustainability, science, when it’s applied to agriculture, is considered suspect, a violation of the slow food aesthetic…

That includes the development of plants with natural resistance to blight and other diseases — plants like the Mountain Magic tomato, an experimental variety from Cornell that the Stone Barns Center is testing in a field trial. So far there’s been no evidence of disease in these plants, while more than 70 percent of the heirloom varieties of tomatoes have succumbed to the pathogen.

Mountain Magic is an example of regionalized breeding. For years, this kind of breeding has fallen by the wayside…

Healthy, natural systems abhor uniformity — just as a healthy society does…

What does the resilient farm of the future look like? I saw it the other day. The farmer was growing 30 or so different crops, with several varieties of the same vegetable. Some were heirloom varieties, many weren’t. He showed me where he had pulled out his late blight-infected tomato plants and replaced them with beans and an extra crop of Brussels sprouts for the fall. He won’t make the same profit as he would have from the tomato harvest, but he wasn’t complaining, either.

This kind of thinking involves education, but not education of the top-down, web-enabled type that one hears so much about at Davos every year. Instead, it’s a slower but more robust form of bottom-up education, enabling farmers to identify problems, find their own individual solutions, and reject one-size-fits-all approaches. Everybody in the audience was excited when Bill Gates started talking about how much extra wealth flood-resistant rice strains brought to some of the poorest rice farmers in south-east Asia. But no one talked about creating relatively small and self-sufficient agricultural communities: the model is still very much that you sell your one crop for money, and then use that money to buy whatever other food you might need.

And there are big problems with that model, not least because the hungriest nations on earth tend to lack the transportation infrastructure necessary to affordably get different crops from one side of the country to the other. There was some interesting talk on the panel about what the CEO of ADM called “post-harvest innovation” — research into the questions of how to get food from big producers of single crops and into the mouths of the hungry without it spoiling or getting somehow diverted or lost. And there was lots of talk based on a simple — indeed, simplistic — syllogism: there are 1 billion hungry people in the world who suffer from malnutrition, therefore there isn’t enough food in the world and we need to invest in agricultural innovation so that we can produce more.

But Barber doesn’t buy it: there’s more than enough food in the world already, he says. Literally more than enough: look at what’s happening to obesity rates, and look at how much food is wasted every day. In a world producing corn and soy on a mega-industrial scale, more food doesn’t necessarily mean less hunger: it’s much more likely to simply result in more waste and worse public health.

Barber’s vision of farmers listening to nature and producing a wide variety of crops suited to the local terroir is compelling, even if it isn’t a panacea: I’d urge you to watch his TED talk, especially where he ties it all together in the final three minutes. Food will always be a commodity, and as the world becomes increasingly urbanized, it will always be trucked in to massive cities over long distances. But there’s no reason why different cities in the same country should increasingly eat exactly the same food. Localization and heterogeneity have to be part of the solution, and there was no sense of that at all on the Davos panel.

When I was at Davos two years ago, Michael Pollan and Alice Waters were big draws. This year, Barber is getting a lot of attention. But there seems to be a disconnect: people think of the locavores as solving a luxury problem of how to eat healthier and more delicious food in rich countries, and they’re not asking whether they have anything to teach with respect to big questions like world hunger.

That might be changing: Barber told me about a brief conversation he had with Bill Clinton, where Clinton said that he now greatly regrets a lot of the agricultural policies he put in place as president. And Clinton, of course, is thinking long and hard about designing agricultural systems these days, given that agricultural production accounts for most of the wealth of Haiti and needs to be rebuilt more or less from scratch. Here’s hoping that Clinton helps to build an agricultural system in Haiti which is designed first and foremost to feed Haitians through diverse local food production, and only secondarily to provide export income to buy food and other necessities. Because the cash-crop model, as we’ve seen many times, is far too prone to disastrous failure.

I’ll be doing a live video interview with Nouriel Roubini here on Reuters.com in a couple of hours (6:20pm Davos time, 5:20pm GMT, 12:20pm ET), asking him questions from readers. So if you have anything you want me to ask him, leave a comment on this blog or on the liveblog, or send a tweet with the #askroubini hashtag. It should be fun!

Update: Here it is!

I’m not a fan of excluding Treasuries from the proposed new bank tax. For one thing, Treasuries are assets, not liabilities: they’re technically not covered by the tax in the first place. What’s really being talked about here is the repo market, which has grown far too big, and which has made it far too easy for banks to borrow money at ultra-short maturities.

It’s true that if the repo market shrank dramatically, that might conceivably reduce demand for Treasuries so much that, as JP Morgan has suggested in a research note, the revenue from the fee could be completely offset by the Treasury’s increased costs of borrowing. On the other hand, estimates of the effects of reduced demand on Treasury prices are notoriously unreliable.

Against that is the fact that shrinking the repo market is probably the easiest and most painless mechanism that we have for shrinking the banks — and we want to shrink the banks. In that sense, the deleterious effect of the new fee on the repo market should probably be considered a feature rather than a bug. Let’s keep it in.

This is a great hire: the Huffington Post has brought on Simon Johnson as a contributing business editor, underscoring the way in which the historically staid and boring intersection of politics with economics is pretty much the hottest game in town right now.

The hire works both ways: Simon bring with him a huge amount of credibility and expertise, a fantastic nose for newsworthiness, and his equally-bright partner at Baseline Scenario, James Kwak, who understands intuitively the speed and power of the blogosphere. At the same time, Simon and James now get access to the HuffPo’s reporting staff, who have been doing great work of late, and who are a great resource with a truly complementary skillset to that of the Baseline Scenario team.

Up until quite recently, the blogosphere was almost entirely parasitical on the MSM: newspapers would do the shoe-leather reporting, and then bloggers would add layers of conversation, commentary, and debate. The exception was the world of technology and media blogs, where the likes of TechCrunch and PaidContent have been breaking news for years. Now, as the likes of Politico and HuffPo start aggressively reporting in their own right, the blogs are moving into the world of original political reporting; inevitably, over the next couple of years, we’ll see the same thing happening in finance and economics.

Reporters are expensive, of course, and you can’t expect them to post multiple times per day if they’re chasing down a breaking story. But as the FT and the WSJ retreat behind their firewalls, there’s a wide-open opportunity for a fast-moving and well-financed financial site to start becoming a must-read on Wall Street in the way that TechCrunch and Politico are in Silicon Valley and DC respectively. Maybe if Simon helps to build the HuffPo business section into something agenda-setting, the next step might be for Arianna to move into the world of finance, competing with the likes of Henry Blodget, and making the financial blogosphere in general something much richer and deeper than it is right now.

Emanuel Derman passes on an email from a former student, who’s now working at ****:

Will Sharpe came up with his Capital Asset Pricing Model (which we use at **** all the time, in its most simplistic form) and now it is part of the dogma that asset returns are linearly related to market returns. What is the logical basis to assume a linear relationship here? He could have just as easily assumed a cubic relationship (which will almost by definition fit past data better) and done the same work. His math would have probably gotten messier, but it is hard to find any merits to the linear assumption other than the fact that it is simple. I am all for simplicity, and perhaps if I asked Sharpe he’d tell me that was just a reasonable first approximation, but that is certainly not the way in which people use it now (maybe they are not so rational after all?).

The fact is that **** could be pretty much any buy-side or sell-side firm in the world. And so long as they all talk about concepts like “alpha” in more or less the same way, as though it’s a real scientific thing, in a way it doesn’t matter whether it’s based on empirically-justifiable principles or not. Still, this is a useful reminder that when finance types start blinding you with science, it’s not science in the sense of actually reflecting reality. At best it’s a useful fictional construct, at worst it can help cause a global economic meltdown.

It’s Goldman-bashing time again (when isn’t it), with Michael Lewis returning to the same source of comedic gold that he’s mined in the past. His new column should be here, but isn’t; Alphaville has excerpts.

I have no problem with this kind of thing; I only wish it were a bit funnier. I’m all in favor of opinion columnists bashing Goldman every so often; I certainly do it often enough myself. On the other hand, they shouldn’t be allowed to get away with outright falsehood and extravagant stupidity. So why is Ben Stein writing for Fortune, and why are they letting him exude this kind of crap about Goldman Sachs?

Obviously, Goldman can put any disclaimer it wishes in the boilerplate of the offering documents. But as underwriters, it has a duty to deal fairly and honestly with its buyers, and to deal as a fiduciary, putting clients’ interests first if the buyer is a client of the firm. It holds itself out to the world that way, too. It holds itself as “adding value” when its works for a pension fund or any buyer by selling him securities. Read the annual report.

That is, it, Goldman, has a legal duty to not take advantage of the people to whom it acts as a fiduciary.

Does Stein think that if he uses the word “fiduciary” often enough, he’ll be able to change what it means? A broker-dealer, by its very nature, is an intermediary, a middleman. If you trade with Goldman, it’s either acting as a broker — finding someone else in the market who wants to buy what you’re selling, or sell what you’re buying — or else it’s acting as a dealer, and taking the opposite side of the trade itself. In neither case can it be a fiduciary.

A fiduciary is someone who invests someone else’s money on their behalf; Goldman Sachs Asset Management is one such institution which does indeed have a fiduciary duty to its clients. But Goldman’s traders are by definition the opposite: far from having their interests aligned with the people they’re trading with, they actually take the opposite side of the trade. Besides, when Goldman underwrites an offering of new securities, its client is the issuer, not the buyer of the paper. If Goldman had a fiduciary duty to its client in such matters, it can’t also have a fiduciary obligation to the investors in the deal.

But Stein hasn’t reached the heights of its idiocy quite yet. He continues:

Obviously, it’s different if Goldman is trading with a hedge fund or a canny wealthy trader who is not a client, who takes all kinds of risks. But when underwriting and selling to clients, such as pension funds, Goldman has a legal and moral duty…

The problem, of course, is for Goldman to be able to discern, for any given counterparty, whether Ben Stein would consider them to be “not a client” or a client. The bank is providing exactly the same service to the “canny wealthy” types as it is to “clients such as pension funds” — but Stein seems to think that every trader should have a red phone and a blue phone, with one used for “clients” and the other one used for “not a client”s. How to tell them apart? Maybe the traders should phone Stein first, every time, just to be on the safe side.

What kind of magazine prints this stuff? What kind of editor allows a columnist to get away with something like this?

Simple fact: if the banks’ proprietary trading had been consistently profitable, they would not have needed to be bailed out by the taxpayers in 2008.

Does Stein really think that the losses suffered by the banks in 2008 were the result of prop trading? That somehow the hundreds of billions of dollars in writedowns on toxic loans were so small that a consistently profitable prop-trading operation could have more than made up for them and obviated the need for a bailout?

Of course not: Stein doesn’t think. But as a result, his columns are neither interesting nor provocative: they’re just stupid. And I can’t for the life of me work out why Fortune is publishing them.

The iPad: a godsend to older types who can’t or won’t get comfortable with computers. And women. — Ultimi Barbarorum, ibid

The wonderful story of the zero-rupee note — World Bank

Weak euro states may have “fatal” impact, says German Minister — Reuters

This time last year, Justin Fox’s idea of a clever blog entry was a video of him skiing in Davos. This year, now that he’s absent from Davos and has a brand-new job at HBR, he’s writing about “the attraction of hybrids like continuous workout mortgages or regulatory hybrid securities”. Staying away from Davos can do wonders for your blog quality! You should read his blog entry, it’s really good — it talks about all the different ways in which debt can be made a bit more like equity, and asks why they haven’t really caught on.

The answer, I think, is that bond investors have no idea how to price tail risk. One of the reasons that bonds are so popular is that they’re easy to price, partly because they do a really good job of hiding risk by pushing it all off into tail events, which then get ignored rather than priced. The slogan is that debt=denial.

The kind of securities that Justin’s talking about, by contrast, are almost impossible to price. If you offer a bond investor optionality on top of the bond coupon, you won’t get paid for it: just look at Argentina, which essentially ended up giving away its hugely-valuable GDP warrants. And that’s a good outcome, for a borrower, compared to securities where the investor can end up losing money even when there isn’t a formal default. Bond investors always want their money back; if there’s a chance that won’t happen, they will charge through the nose. And that’s if they participate at all.

The two main groups of securities are stocks and bonds. Bonds are easy to price, which means they can get away with being illiquid: you don’t need much of a market to know how much they’re worth, and you can hold them on your books at a certain value even when that particular bond hasn’t traded in months. Stocks, by contrast, are pretty much impossible to price, so you need a highly liquid market to tell you how much they’re worth, and you tend to mark your holdings to market every day.

One thing that all of the securities that Justin’s talking about have in common — along with even crazier creatures like CoCo mortgages — is that they’re both hard to price and illiquid. That’s bad for both borrower and lender: the only group who really wins with that kind of security is the investment-banking intermediary. I mean, who would want to buy a mortgage where the interest payments automatically fell if house prices dropped? And who would want to borrow money on the basis of their steady income, if they knew that their mortgage payments could rise substantially just if the value of their house went up? And who would pay for the appraisals which would be necessary to prove that the individual house in question had indeed risen or fallen in value? It’s all horribly complicated and expensive, and those kind of problems are symptomatic of the entire class of these securities. Even the relatively successful Danish model doesn’t really scale to a country the size of the US.

These instruments might reduce systemic risk, but they simply don’t lend themselves to a long and healthy existence being traded in the international capital markets. And therefore, sadly, they ain’t never gonna work, except for on a very small and experimental level. But I’m sure that’s not going to stop Bob Shiller from continuing to come up with more variations on the theme.

Journalists love to talk to each other at parties, and Davos, being in many ways one big party, is covered with pockets of hacks gossiping away about off-the-record events. And one factoid which has emerged from the off-the-record fog is a story which will come as a great disappointment to many journalists hoping that paywalls will be the savior of their profession.

I hear that the brass at the New York Times expect its paywall to be revenue neutral — the amount of money they expect to bring in from online subscriptions is pretty much equal to the amount of money they expect to lose from online advertising.

I’ve been running the numbers on the NYT paywall for a while now, and this comes as no surprise to me. But if the NYT doesn’t expect to make money doing this, why are they still going ahead with it?

The answer is that a paywall comes with a certain amount of option value. Once it’s implemented, nytimes.com will have two revenue streams rather than one, and diversification in and of itself is quite a good thing. If the online ad market gets worse rather than better, the subscription base will help to cushion the blow. More generally, a metered paywall is a flexible thing: if it turns out to be costing the paper money, the meter can be dialed back so far that almost nobody ever hits it. On the other hand, there’s a small possibility that the paywall will be an enormous success, and make a large difference to total revenues — maybe not at first, but once you have your subscribers, they tend to be pretty price-insensitive, and will happily keep on renewing even as you continue to raise the subscription price.

Essentially, then, the paywall looks, on its face, a bit like a free lottery ticket for the NYT. It probably won’t pay out, but it might, and if it doesn’t, at least the paper won’t have lost much if any money.

What’s sad here, of course, is that the NYT has given up its dream of winning the other lottery: becoming such a popular and high-value global news source that it will be able to make a very large amount of money from a free website. And it’s also sad that the NYT is happy to risk losing its paper-of-record status online for the sake of making this bet.

My feeling is that there’s a very good chance — say 1 in 3 — that the new NYT paywall will end up bringing in less money than the failed TimesSelect managed to generate. I never suspected until now, however, that the internal analyses at the NYT might be saying exactly the same thing.

I like James Gibney’s evisceration of Davospeak:

Dr. Schwab and Company have made a handsome business out of enabling old-fashioned clubby capitalism by wrapping it in feel-good globoblather: “unprecedented multistakeholder, multimedia dialogue…look at all issues on the global agenda in a systemic, integrated and strategic way…intensify collaboration and develop innovative solutions…generate an unprecedented process of discussion and deliberation.” As George Orwell tellingly observed, “When there is a gap between one’s real and one’s declared aims, one turns as it were instinctively to long words and exhausted idioms, like a cuttlefish spurting out ink.” The next time you hear “multistakeholder,” remember that, in Davos at least, corporations hold the biggest stake.

It was probably unfortunate, then, that no sooner had I read that than I stumbled across the Global Business Oath of the Young Global Leaders. What is a Young Global Leader? You really can’t make this stuff up:

The Forum of Young Global Leaders is a unique multi-stakeholder community of exceptional young leaders who shares a commitment to shaping the global leader.

These young leaders have now started taking an oath which culminates with this:

7. I will actively engage in efforts to finding solutions to critical social and environmental issues that are central to my enterprise, and

8. I will invest in my own professional development as well as the development of other managers under my supervision.

As far as I can make out, this is essentially code for “I will continue to attend Davos even when I’m over 40 and no longer a Young Global Leader”. Or, to put it another way, it’s Davos’s way of getting these people to pay to come to Davos once they’re established, after flattering them with free passes in their youth.

“Young Global Leader”, to the World Economic Forum, is code for “people who will be in a position to spend large amounts of money on sponsorships in years to come”. But hey, at least they get an oath out of it.

Update: The Oath doesn’t just have a website, it also has a Twitter feed! Thanks to that, we can all now rest reassured that Stefan de Rothschild (typical tweet here) has accepted the Global Business Oath.

Over on his personal blog, the father of the oath, Ángel Cabrera, says that this project was five years in the making. Wow.

Update 2: Turns out Stefan de Rothschild is a hoax; he’s not a YGL, and he wasn’t at Davos. But David de Rothschild and Nathaniel Rothschild are YGLs. I don’t know whether they’ve taken the oath. (Thanks to commenter oscarlechien)

Bill Cohan gets an interview with Jon Winkelried, who left Goldman Sachs abruptly in February 2009 from his position as one of two possible successors to Lloyd Blankfein:

Blankfein urged Winkelried not to resign when Winkelried brought up leaving at his annual review in December. Over the holidays, at their ranch in Colorado, Winkelried and his wife reached the decision that as soon as he “was comfortable” that the firm was “on sound footing in terms of the future,” he would retire. That moment came on Feb. 12, 2009. “What was clear to me was that Goldman was probably going to be net-net a beneficiary of what happened,” he says.

Winkelried went to talk to Blankfein one final time and told him he intended to leave at the end of the first quarter. Blankfein was not pleased.

How believable is Winkelried when he says that Goldman was on a sound footing in February 2009? Well, here’s the chart:

Goldman stock was over $200 a share going into 2008, but ended the year at barely over $80. In mid-February it was still very much in its post-crash trough: on February 12, the date that Winkelried made his decision, it was about $95. Today, even in the wake of Obama’s new war on investment banks and prop trading, it’s still over $150.

My sympathies, then, are with Blankfein on this one. Winkelreid got paid $53.4 million in 2006, and $67.5 million in 2007. That should have bought a bit more loyalty than this: instead, Winks upped and left when Goldman’s continued existence was more in question than it had been in decades. Sure, his chances of becoming CEO one day might have been diminishing. But he didn’t show a lot of loyalty to the firm.

Mike Konczal has an excellent two-part blog entry on the state of the mortgage market, and it only reinforces my belief that the crisis isn’t over and that both the housing and the banking sectors are going to get much worse.

Konczal describes the government’s HAMP loan-modification program as “a long, stressful process which appears to leave nobody better off”, and highlights this chart:

The key thing to note here is the bottom, darkest line: while delinquencies and initiated foreclosures have been rising, there’s a limit to how many foreclosures can actually be completed, and that limit seems if anything to be falling.

What this says to me is that while we aren’t going to see a wave of foreclosures, we are going to see a large and more or less constant number of foreclosures for the foreseeable future — with all the gratuitous value destruction that implies.

Konczal also looks long and hard at the banks’ refusal to write down the principal on their loans, despite the fact that if you modify a loan so that it remains seriously underwater, you’re pretty much guaranteeing an extremely high redefault rate. After all, negative equity is pretty much the best single predictor of delinquency.

Why are the banks behaving like this? I think the obvious answer is the right one: they’re holding these loans on their books at much more than they’re really worth, and they can’t afford to take the write-downs which would accompany principal reductions of roughly the same magnitude as the decline in housing prices. This kind of head-in-the-sand behavior can only possibly work if housing prices suddenly rebound in the next couple of years, and that ain’t gonna happen.

Both the Bush and the Obama administrations tried to put together programs to deal with the banks’ toxic residential real-estate assets: the original TARP was one, the PPIP was another. Neither went anywhere, and as a result the problem is just as bad now as it’s always been. Remember that, when you look at the enormous 2009 bank bonuses, and ask yourself whether any of them will be clawed back if it turns out that last year’s profits were dwarfed by the write-downs that banks should have taken and didn’t.