May 23, 2017

Economix Blog: High Profits Signal Danger for Big Banks

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Simon Johnson, former chief economist of the International Monetary Fund, is the Ronald A. Kurtz Professor of Entrepreneurship at the M.I.T. Sloan School of Management and co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

In their latest earnings reports, the biggest banks in the United States are reporting eye-popping levels of profitability that surprise even Wall Street analysts. Goldman Sachs’s profit doubled in the second quarter of this year from the comparable quarter a year ago. JPMorgan Chase could make $25 billion for the whole year. Bank of America reported that net income rose 63 percent. Even Citigroup, so often the sick man of American megabanks, managed its best results since 2007, with $4.2 billion in net income in the quarter.

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These results create a major political problem for the big banks, a point that Tom Braithwaite has made in The Financial Times (subscription required). Executives at these companies have spent most of the last four years asserting that stronger regulation in the United States, including higher capital requirements, will result in lower profits, a reduced ability to lend and a slower economic recovery for the nation.

Yet higher capital requirements are already in place, with further steps in the works, including a tougher leverage ratio at the initiative of the Federal Deposit Insurance Corporation (so the country’s biggest banks would need to finance themselves with relatively more equity and relatively less debt). And regulation has tightened to some degree. There is also more political scrutiny – hence executive compensation is being held below the levels that were previously associated with this much profit.

In Europe, regulation remains weak, and the banks are floundering. In the United States, the rules are tightening, and the big banks are doing great. Once American politicians and regulators reflect further on exactly why the banks have become so profitable, this will only reinforce the latest push for more reform.

The banks have easy funding. The very largest banks can borrow cheaply – this is, in fact, a key part of the unconventional loose monetary policies being pursued by the Federal Reserve. To be fair, the Fed wants lower interest rates for everyone, but the biggest banks benefit the most.

As Senator Sherrod Brown, Democrat of Ohio, emphasized at a recent hearing, there is also an implicit government guarantee for these banks, a point now acknowledged by Treasury Secretary Jacob J. Lew.

Despite everything that has happened in the last half decade, the very largest banks, including JPMorgan Chase, Goldman Sachs and Citigroup, can engage in some very risky business.

This is a great deal – a government backstop for your cheap funding combined with the ability to take a lot of risk (e.g., metal warehouses, where JPMorgan Chase and Goldman Sachs are big investors, or emerging markets, where Citigroup has a great deal of exposure.)

These very large banks do not have much equity in their businesses; it is all about the leverage (meaning they fund their loans and other asset holdings mostly with debt). For example, at the end of the second quarter, JPMorgan Chase had shareholder equity of just over $200 billion and a total balance sheet of around $2.5 trillion (under the generally accepted accounting principles used in the United States ) or closer to $4 trillion (using international accounting standards, which treat derivatives exposure in a different way). So JPMorgan Chase had from 5 to 8 percent of its balance sheet, depending on which accounting measure you prefer, funded with equity and the rest with debt (read the long version of its earnings release to see this clearly).

JPMorgan Chase is a very highly leveraged business, and the same is true of other megabanks. When things go well, such highly leveraged companies make high returns – measured in terms of return on equity (unadjusted for risk). For example, trading securities can sometimes help increase profits; this was the experience of Citigroup in the latest quarter and before 2007 (and also for JPMorgan Chase and Goldman Sachs).

Charles Prince, the former chief executive of Citigroup, famously remarked, “But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” This was in July 2007 when, really, the music had already stopped (the subject of a commentary from Yves Smith at nakedcapitalism.com at the time).

The banks are lifted now by the (partial) economic recovery. But what happens when the economy weakens in the United States or somewhere else in the world? What happens also when money is lost on securities trading or on loans to emerging markets or on complex derivatives that no one in management fully understands? More highly leveraged businesses go up faster and come down further.

At the same time, a deeper political shift is under way, with a big step toward bipartisan agreement that structural change is needed in our largest banks. Specifically, Senator John McCain has joined forces with Senators Elizabeth Warren, Maria Cantwell and Angus King to push for a 21st century Glass-Steagall Act.

Speaking with Yahoo Finance this week, Senator King, an independent from Maine, made a common-sense and compelling case that the United States needs to limit reckless gambling using insured deposits – and the only way to do this is with structural change, separating out boring banking from high-risk trading activities (see also this interview with Elizabeth Warren on CNBC).

Thomas Hoenig, vice chairman of the F.D.I.C., also explains clearly that breaking up the banks along functional lines would be helpful – we should aim to separate relatively risky “broker-dealer activities from the federal safety net.” (I have also contributed to this debate in recent days, including in a column for Bloomberg News, in my baselinescenario blog and an NPR interview.)

Whenever global megabanks report huge profits, think about the risks they are not reporting and who will bear the costs. The good news is that leading senators are starting to think along exactly these lines. Regulators will take note.

Article source: http://economix.blogs.nytimes.com/2013/07/18/high-profits-signal-danger-for-big-banks/?partner=rss&emc=rss

Syria Weighs Its Tactics As Pillars of Its Economy Continue to Crumble

Two years of war have quintupled unemployment, reduced the Syrian currency to one-sixth of its prewar value, cost the public sector $15 billion in losses and damages to public buildings, slashed personal savings, and shrunk the economy 35 percent, according to government and United Nations officials.

The pillars of Syria’s economy have crumbled as the war has destroyed factories, disrupted agriculture, vaporized tourism and slashed oil revenues, with America and Europe imposing sanctions and rebels taking over oil fields.

Increasingly isolated in the face of a growing economic crisis that has reduced foreign currency reserves to about $2 billion to $5 billion from $18 billion, a government that long prided itself on its low national debt and relative self-sufficiency has now been forced to rely on new credit lines from its main remaining allies — Iran, Russia and China — to buy food and fuel.

The government has a $1 billion credit line with Iran, and borrows $500 million a month to import oil products delivered on Russian ships, a government consultant, Mudar Barakat, said in a recent interview in Beirut. Some analysts believe the government will need even more aid from those countries to keep paying government workers and a growing roster of security forces.

Now, some officials hope to push through measures to tighten state control of the economy, rolling back some of the modest economic liberalization and support for private business that President Bashar al-Assad introduced early on, in a departure from his party’s socialist roots.

“We’re thinking of going back to the way it was in the 1980s, when the government was buying the main necessities of daily life,” Mr. Barakat said. “We, as a government, must cover the daily needs of the people, no matter how much the cost is, and keep the prices low.”

Syria’s economic problems, in Mr. Barakat’s view, are rooted in the loosening of state control by reformers favored early in Mr. Assad’s tenure, who he said “vandalized” the economy “into this liberalized sort of chaos.”

A faction that includes Kadri Jamil, a Russian-educated, socialist former professor who was appointed deputy prime minister in charge of the economy in a shake-up last year, hopes Syria can weather the storm by raising wages, tightening price controls on subsidized goods like bread, cracking down on black-market currency traders and even ceasing government trade in dollars and euros.

The government, Mr. Barakat said, now signs new foreign trade deals only in the currencies of friendly countries to insulate itself from what it sees as an economic conspiracy orchestrated by its international enemies.

But such measures — met with ridicule and even defiance by some Syrian businesspeople — will provide at best short-term relief, economists say.

Even the free-flowing aid from Iran and other allies inspires little confidence among Syrians, said an economist in Damascus who asked not to be identified publicly as criticizing government policies, because it shows the government “has no means and depends on others to save it.”

A Damascus businessman derided the new policy of doing business in Iranian, Russian and Chinese currencies.

“These countries themselves do business in dollars and euros,” he said, adding: “Syria today is not Syria in the 1980s. It is easy to keep the door closed, but it is hard to close it after it has been open 13 years and people are used to breathing the fresh air.”

This month, the government banned food exports and announced a crackdown on black-market money traders. The value of the Syrian pound plunged to 330 to the dollar, down from 47 before the war.

On Wednesday, amid a flurry of panicked dealing, the Central Bank tried and failed to strong-arm traders into selling the Syrian pound at a higher, preset price. Dealers said Central Bank officials offered to guarantee a tiny profit if they would sell the pound at a rate of 250.

Reporting was contributed by an employee of The New York Times from Damascus, Syria; Hala Droubi from Dubai, United Arab Emirates; Hania Mourtada and Hwaida Saad from Beirut; and Ben Hubbard from Cairo.

Article source: http://www.nytimes.com/2013/07/14/world/middleeast/government-in-syria-searches-for-answers-as-economy-crumbles.html?partner=rss&emc=rss

Economix Blog: Simon Johnson: The Problem With Corporate Governance at JPMorgan Chase

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Simon Johnson, former chief economist of the International Monetary Fund, is the Ronald A. Kurtz Professor of Entrepreneurship at the M.I.T. Sloan School of Management and co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

Some proponents of the current American version of corporate capitalism contend that if there is a problem with the way our largest companies are run, shareholders will take care of it – by putting pressure on directors, sometimes voting them out. Shareholders are not supposed to replace chief executives directly but apply pressure to the board to improve oversight and produce management change when appropriate.

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In contrast, critics like to point out that owners – including small shareholders, pension funds and large mutual funds – seem unable to exercise even a modicum of control over many of today’s larger corporations, particularly the largest financial institutions.

The situation at JPMorgan Chase, in the run-up to its annual meeting on May 21, is an interesting test case with regard to two specific decisions: whether Jamie Dimon should continue to serve as both chief executive and chairman, and whether three members (David Cote, Ellen Futter and James Crown) of the risk committee of the board should be voted out.

Two proxy advisory firms – Glass, Lewis Company and Institutional Shareholder Services Inc. – have called for JPMorgan Chase shareholders to vote against the recommendations of management on both issues. Leading shareholders have apparently not yet made up their minds – and are being lobbied hard by supporters of Mr. Dimon to resist change. Mr. Dimon likes being chief executive and chairman and very much wants to keep things that way.

The interests of shareholders would be better served by following the advice of Glass Lewis and Institutional Shareholder Services. (Glass Lewis is also recommending that the three members of the board’s audit committee be replaced; I support that suggestion.)

Changing board governance is not a panacea at any company. An independent chairman can be an effective constraint on a chief executive, but many chairmen lack the stature or experience to play that role. And the risk committee of a big bank will always be constrained by the knowledge and ability of board members, very few of whom understand the risks in large financial institutions today. (There is a process of certifying that board members have relevant expertise; it is meaningless.)

Still, JPMorgan Chase undoubtedly has a serious problem from a shareholder perspective that needs to be addressed through strengthening board oversight.

Exhibit A in this discussion is the recent report by the Senate Permanent Subcommittee on Investigations, headed by Carl Levin, Democrat of Michigan, the chairman, and John McCain, Republican of Arizona, its ranking minority member, into the so-called London Whale trades that lost more than $6 billion. This report finds repeated failures in risk management at the highest levels within the company.

As Senator McCain put it (see the second statement):

JPMorgan executives ignored a series of alarms that went off as the bank’s Chief Investment Office breached one risk limit after another. Rather than ratchet back the risk, JPMorgan personnel challenged and re-engineered the risk controls to silence the alarms.

The report itself is more than 300 pages and the exhibits run around 500 pages (links to both documents are on the upper left on this page). For a concise statement of the core issues, I recommend this analysis by Bart Naylor of Public Citizen focusing on Exhibit 46 and explaining how JPMorgan Chase executives were gaming regulatory constraints to drive up their stock price (and presumably bonuses).

Specifically, the bank’s senior management changed how they calculated the risk of their positions so that they could reduce the amount of equity funding they needed. This allowed them to increase their leverage (borrowing relative to assets) as well as their risk – without this risk actually showing up in a report.

Mr. Dimon says he did not know this was going on, but even his denial is a concession that his management system completely broke down.

JPMorgan Chase’s policy, as stated to shareholders in its annual report, required risk limits to be taken seriously, with senior management responsible for signing off on high-level model changes. It is not unreasonable for shareholders to expect Mr. Dimon himself would take these risk limits seriously. And where was board oversight in this entire process?

For further detail, you can read the summary opening statement by Senator Levin (the first statement on the subcommittee’s Web page). Or try this somewhat more colorful and even emotional assessment by Matt Levine, a commentator who does not usually agree with people like Senator Levin, Mr. Naylor, and me that very large banks can pose serious danger to society (caution: Mr. Levine’s language is not suitable for family members too young to have a brokerage account).

Or, if you are a JPMorgan Chase shareholder, read the full report – or at least the executive summary. And wonder about whether a handful of traders and one inexperienced risk officer (with questionable authority) can effectively oversee a complex derivatives portfolio that grew tenfold over a period of months (with a notional value eventually in the trillions of dollars). How can a member of the board’s risk committee without financial services expertise possibly spot the risks and ensure management is keeping the bank out of trouble?

Senator McCain makes the link to the important broader policy issue on Page 3 in his opening statement:

This bank appears to have entertained – indeed, embraced – the idea that it was quote “too big to fail.” In fact, with regard to how it managed the derivatives that are the subject of today’s hearing, it seems to have developed a business model based on that notion.

Whether shareholders should be bothered by a firm’s being too big to fail is an interesting question. If this status purely confers a subsidy – in the form of taxpayer support when things go badly – then we should expect shareholders to be quite excited by the prospect.

Unfortunately for shareholders, the JPMorgan Chase case demonstrates that the distortion of incentives also means it is much harder to control what goes on at a large complex financial company. From 2000 through the end of 2012, the stock was down 15 percent; midsize banks have done much better over this time period. You can call this “too big to manage,” but it is more likely that executives and traders on the inside are doing well, so it is really outsiders (e.g., shareholders, as well as taxpayers) who are doing badly.

The London Whale losses did not bring down the company, but shareholders still have cause to want change. When planes almost collide at an airport, we do not say, “there was no actual accident, so that means the system works well.” Instead, our reaction is along the lines of, “What went wrong?” and “How can we prevent this from happening again?”

But at JPMorgan Chase, it is business as usual, despite reports of further regulatory investigations into other areas of the bank, including whether it helped manipulate interest rates and commodities prices and whether it was honest with shareholders and regulators about the London Whale big bets on derivatives.

What is likely to happen on or before May 21? Large shareholders will not want to rock the boat, and the prospect of continuing too-big-to-fail subsidies is too alluring. Mr. Dimon and his board will get another chance.

That will be good news for Mr. Dimon and his directors, but bad news for the rest of us, again. And JPMorgan Chase’s shareholders will likely not do so well, once more.

Article source: http://economix.blogs.nytimes.com/2013/05/09/the-problem-with-corporate-governance-at-jpmorgan-chase/?partner=rss&emc=rss

Today’s Economist: Simon Johnson: Jacob Lew, Mary Jo White and Dunbar’s Number

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Simon Johnson, former chief economist of the International Monetary Fund, is the Ronald A. Kurtz Professor of Entrepreneurship at the M.I.T. Sloan School of Management and co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

Jacob J. Lew, the president’s nominee for Treasury secretary, and Mary Jo White, the nominee for chairwoman of the Securities and Exchange Commission, are making financial reformers nervous. The issue is not so much their track record, because neither has worked directly on financial-sector policy issues; it is much more about whom they know.

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Specifically, how many people do they know and trust outside the financial sector, away from the sphere of influence of the very large banks? More pointedly, when it comes to thinking about financial-sector policy, who exactly is in their inner circle?

Nobody knows a huge number of people, at least not well. In the language of anthropology and biology, the limit to a person’s social network is known as Dunbar’s Number – which is 147.5, although people often round it to 150. Our brains do not support the interactions required by larger social groups.

More precisely, the predicted size for most human groups, based mostly on the characteristics of our brains, is 100.2 to 231.1 people. For details and caveats, look at Robin Dunbar’s 1993 paper, “Co-evolution of neocortical size, group size and language in humans,” published in Behavioral and Brain Sciences (Issue 16, Pages 681-735). Or just think about the number of people you know well and would rely on for advice, particularly with complex and sensitive issues. When you get to know new people, you often lose track of your previous close colleagues or even good friends.

And what applies to ordinary mortals most definitely applies to the people elected or appointed to run the country. Whenever the world gets complicated – for example, because the financial sector has turned nasty – policy makers need trusted sources and established confidants in order to figure out which way is up and what needs to be done.

If most financial experts you know work at, for example, Citigroup, then you are more likely to see the financial world through their eyes. What is good for Citi (and its executives) will, in your mind, become close to what is good for the United States.

One of the most serious concerns about Treasury Secretary Timothy Geithner was that even though he had never worked in a bank, his social network was full of bankers, mostly because of his time at the Federal Reserve Bank of New York and his close connection with Robert Rubin, a former Treasury secretary and then a director of and senior adviser to Citigroup. In this network, many of Mr. Geithner’s deepest financial-sector connections appear to have been with people who were working at Citigroup in 2007-8. (See, for example, a 2009 article by Jo Becker and Gretchen Morgenson.)

This observation lines up remarkably well with the devastating critique of Mr. Geithner in Sheila Bair’s book, “Bull by the Horns.” The main concern of Ms. Bair, former chairwoman of the Federal Deposit Insurance Corporation, is that Mr. Geithner was too close to Citigroup and saw the world as its senior executives did.

As Treasury secretary, Mr. Geithner hired people from Citigroup – particularly people who had worked closely with Mr. Rubin (in government or in the private sector or both). Now Mr. Lew, a Citi alum with a central position in the Rubin network, is on the verge of becoming Treasury secretary. How likely is Mr. Lew to confront the risks created by unstable global megabanks? Does he personally know anyone who is concerned about the damage that Citigroup is likely to do in the future – or even has a critical view of what it has done in the past?

While Ms. White’s reputation as a prosecutor is second to none, as a defense lawyer she represented executives at several of the largest banks and knows many prominent financial-sector executives. Her husband, John W. White, now a corporate lawyer, had a senior role at the S.E.C. when Christopher Cox was its chairman, a time when the S.E.C. was aiding and abetting excessive deregulation at every opportunity; Ms. White will need to step aside in actions against companies her husband has advised. To whom will Ms. White turn when she wants to understand how to make the financial sector safer?

If confirmed, Mr. Lew and Ms. White face formidable policy agendas. They need to demonstrate both an impressive grip of the details of what works in financial sector reform, as well as the ability to ignore a great deal of whining and to resist other pressure from the megabanks.

The most prominent and urgent case-in-point is that regulators need to complete the Volcker Rule. Mandated by the Dodd-Frank financial reform legislation, this rule will limit the risk-taking of very large banks.

The hitch at this point is primarily the S.E.C. All kinds of excuses can be and have been offered. These have no merit. Congress passed Dodd-Frank more than two years ago, and the regulators have issued draft rules and considered all the comments imaginable. The banking side of the equation – the Federal Reserve, the F.D.I.C. and the Office of the Comptroller of the Currency – is on board. The Commodity Futures Trading Commission will not stand in the way. Everyone is waiting for the S.E.C. to pull the trigger.

If Ms. White cannot get the S.E.C. unstuck, the issue will fall to Mr. Lew, who as Treasury secretary is chairman of the Financial Stability Oversight Council. The legislative intent of Dodd-Frank on this point is clear; I’ve confirmed this by asking legislators what they intended. If a single regulator gets hung up on an issue, the oversight council can override that regulator – to prevent the kind of impasses and lacunas that previously created vulnerabilities in the regulatory system.

Even Mr. Geithner, not the world’s most dynamic reformer, used the power of the oversight council to press the S.E.C. forward on changing the rules for money-market funds. (Interestingly, the Fed has long wanted these rules changed – and Mr. Geithner’s social network obviously includes some top Fed officials.)

Is Mr. Lew willing to push the S.E.C. – perhaps by supporting Ms. White in a forceful fashion – on issuing and implementing the Volcker Rule? Hopefully, this will be a central question in both their confirmation hearings (with the Senate Finance Committee for Mr. Lew and the Senate Banking Committee for Ms. White).

Senator Elizabeth Warren, Democrat of Massachusetts, writing recently for Politico, made the most important point: the administration will only get serious about financial reform when it appoints officials with different attitudes – and, I would say, different social networks – from those who were at Treasury and the S.E.C. over the last four years.

“Personnel is policy,” people in Washington often remark. The next round of appointments, including those at the deputy and under secretary level, is very important. At this point, I am not optimistic about who will get these jobs.

Is the second Obama administration hiring people who understand and can implement financial reform? Or is it again merely promoting people whose social networks are disproportionately tilted toward the big Wall Street banks?

Article source: http://economix.blogs.nytimes.com/2013/01/31/jacob-lew-mary-jo-white-and-dunbars-number/?partner=rss&emc=rss

Today’s Economist: Simon Johnson: Betrayed by Basel

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Simon Johnson is the Ronald A. Kurtz Professor of Entrepreneurship at the M.I.T. Sloan School of Management and co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

The fundamental assumption of modern bank regulation is that nations need to coordinate, and they negotiate the relevant international standards in the Swiss city of Basel, home to the Bank for International Settlements, under whose auspices such negotiations are held. The United States has an important seat at the table, but so do the Europeans and others. These negotiations are shaped by three main forces: the United States, Britain and the euro zone, with Japan often siding with the euro zone. (It’s one country, one vote, so this can easily go against the United States.)

Today’s Economist

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This week the Basel Committee on Banking Supervision, as it is known, let us down – once again. Faced with renewed pressure from the international banking lobby, these officials caved in, as they did so many times in the period leading to the crisis of 2007-8. As a result, our financial system took a major step toward becoming more dangerous. (A visual representation of the Basel Committee’s centrality to all key regulatory matters is clear on this organizational chart, as well as in its charter.)

Why did this happen? Must Basel always let us down? And is there any alternative?

You will no doubt have noticed that very large banks with a global span have an unusual degree of political influence. In particular, they have the ability to threaten the economic recovery. Their line is: if you don’t give us what we want, credit will not flow and jobs will not come back.

Policy makers in Washington are often impressed by this line, although less frequently than they used to be. More and more, managers have begun to understand that the people who run large banks have distorted incentives. Because they receive downside protection from the public sector – the too-big-to-fail phenomenon – bank executives want to take a great deal of risk. When things go well, they get the upside; when things go badly, that is largely someone else’s problem.

How does that desire for risk manifest itself? The banks lobby for the ability to fund themselves with more debt and less equity, and they also want to be less safe on other dimensions, including holding fewer liquid assets.

The Basel Committee this week agreed to water down its liquidity requirements. Felix Salmon of Reuters has a good explanation of why this is a bad idea. Writing in The Atlantic, Jesse Eisinger and Frank Partnoy have a very nice article about continued fragility of banking, because investors think the banks are hiding trouble in the published balance sheets. Confidence in the system is not restored by relaxing regulation.

The deeper problem with the Basel Committee is it overrepresents the euro-zone Europeans. Not only is the euro zone in great difficulty because of economic mismanagement, but its leaders are hoping to get out of their current predicament in part by relaxing bank regulation.

The idea that the Basel process is all about expertise – or smart people working out the right answers – is exploded by Sheila Bair’s book, “Bull by the Horns.” Read Chapter 3, in which she describes in convincing detail the fight over the Basel II agreement during the mid-2000s (and Chapter 4, which is more about how some United States agencies play against in each and on behalf their clients, the big banks).

What we saw before 2007 and what we see now is not officials applying some sort of optimization procedure or sensible independent thinking. Rather, this is about an industry that wants to take more risk because that is how it gets larger subsidies. And this industry is expert at playing the regulators off against each other, including across borders. The Europeans are again the patsy.

Unfortunately, some United States officials are so captured or captivated by the ideology of modern banking that they want to play along. For example, as Ms. Bair mentions, the most dangerous “advanced approaches” of Basel II were developed by the Federal Reserve Bank of New York – not surprising, given how close many people at that institution are to Wall Street. Those advanced approaches let the banks set their own risk-weights on assets, essentially using complex math to determine what was risky and what was relatively safe. Of course, they were almost completely wrong, and Basel II was a dismal failure.

Thank goodness Ms. Bair and her colleagues at the Federal Deposit Insurance Corporation resisted the full implementation of Basel II. Their insistence on simpler safeguards, including a tough cap on debt relative to bank size, helped make our financial crisis less severe than it would otherwise have been. The Europeans drank the Basel II Kool-Aid, and their banks loaded up on poorly understood risks. They will lose a decade of growth partly for this reason.

Now we have moved on to what is known as Basel III, and again the Europeans want to double down by letting the banks do want they want. The stock price of European banks jumped on the news of the latest Basel Committee relaxation of the rules – you should interpret that as a larger expected transfer from taxpayers to bank insiders and (perhaps) stockholders.

The United States must go it alone. Basel agreements should be a floor on our bank regulation (including bank capital, leverage and liquidity), not a ceiling. If our tighter rules induce dangerous banking activities to leave the United States, that is fine. In fact, we should offer to help them pack.

We need a financial sector that works for the real economy – not a continuation of the dangerous, nontransparent government subsidy schemes that have brought the Europeans to their knees.

Article source: http://economix.blogs.nytimes.com/2013/01/10/betrayed-by-basel/?partner=rss&emc=rss

Today’s Economist: Simon Johnson: Changing the Conventional Wisdom on Wall Street

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Simon Johnson is the Ronald A. Kurtz Professor of Entrepreneurship at the M.I.T. Sloan School of Management and co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

There are two fundamentally different views regarding modern Wall Street. The first is that the financial sector has been terribly and unjustly put upon in recent years – regulated into the ground and treated with repeated disrespect, including by the White House.

Today’s Economist

Perspectives from expert contributors.

There was, for example, an impressive amount of whining this week when no one from a big bank was invited to a high-profile meeting with the president on fiscal issues. As the people holding strongly to this view run large financial institutions and have effective public relations teams, this has become an important part of the conventional or establishment wisdom, repeated without question in some parts of the media.

The second view is that the powerful people who run global megabanks have lost all sense of perspective, including failing to realize that they have more access to people at the top of our political power structures than any other sector has ever had. Anyone who doubts this view, or wonders exactly how the revolving door among politics, lobbying and banking works, should read Jeff Connaughton’s account, “The Payoff: Why Wall Street Always Wins” (which I have written about in more detail before). Mr. Connaughton is most gripping when he describes the failure of law enforcement around securities issues, including issues with both the Department of Justice and the Securities and Exchange Commission.

Which of these views is correct? We will soon know, because there is a simple and direct test that is fast approaching: Whom will President Obama nominate as the new chair of the S.E.C.? (Mary Schapiro, the current chairwoman, is widely reported to be stepping down soon.)

There are only two possible outcomes.

The president could pick someone who is very close to the securities industry — for example, a senior financial services executive or one of the industry’s favorite lawyers or someone who already works in its “self-regulatory” apparatus. Any former politician who has taken large donations from Wall Street or an academic who sits on the board of a large financial company would also fit into this category. There is no shortage of candidates from this side of the contest.

Alternatively, the president could choose someone who is not only willing to enforce the law and regulation but who would actively seek to change the conventional wisdom around finance. For example, all too often we hear – including from some top officials – that if we relax the capital requirements, the economy will grow faster in a sustainable manner.

This is a very dangerous idea that completely ignores that Europe went much farther than we did in reducing bank capital in the run-up to 2008 (i.e., allowing banks to finance themselves with more debt and less equity) and that this directly contributed to the complete disaster they now face. Thank goodness that Sheila Bair, then head of the Federal Deposit Insurance Corporation, and a few others, successfully resisted attempts to lower bank capital in a parallel manner in the United States. (If you want more detail on these points, look at Ms. Bair’s new book, “Bull by the Horns,” or the coming book by Anat Admati and Martin Hellwig, “The Bankers’ New Clothes: What’s Wrong With Banking and What to Do About It.”)

Without doubt, part of the problem that led to the crisis of 2008 was weak regulation. But at times when conventional wisdom affirms some form of “new economy” in which asset prices can only go up – and therefore financial institutions should be allowed to borrow a great deal more relative to their shareholder equity — can any regulation be effective?

To make Wall Street safer – and more helpful to the rest of the economy – implementing new rules is not enough. We need completely new thinking about securities markets, including all dimensions of how investors are treated and where financial-system risks lurk. We must be able to trust the financial system again, and we are a long way from this point.

There are three potential S.E.C. chairmen who could have this kind of impact. If you have other names, see if they match these three in terms of integrity, willingness to go against the consensus and ability to get things done.

First, former Senator Ted Kaufman of Delaware has been a consistent advocate for financial-sector reform and was one of the clearest voices during the 2010 legislative process that led to Dodd-Frank. His advice was ignored then; in fact he was opposed directly by Treasury and the White House (see Mr. Connaughton’s book for details). It is not too late for the president to change his mind. (See the longer piece I did a few days ago on Senator Kaufman for this Boston Globe feature.)

Second, Neil Barofsky is the former special inspector general in charge of oversight for the Troubled Asset Relief Program. A career prosecutor, Mr. Barofsky tangled with the Treasury officials in charge of handing out support for big banks while failing to hold the same banks accountable — for example, in their treatment of homeowners. He confronted these powerful interests and their political allies repeatedly and on all the relevant details – both behind closed doors and in his compelling account, published this summer: “Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street.”

His book describes in detail a frustration with the timidity and lack of sophistication in law enforcement’s approach to complex frauds. He could instantly remedy that if appointed — Mr. Barofsky is more than capable of standing up to Wall Street in an appropriate manner. He has enjoyed strong bipartisan support in the past and could be confirmed by the Senate (just as he was previously confirmed to his TARP position).

Third, Dennis Kelleher is a former senior Senate leadership aide with a great deal of political experience, including during the financial crisis and in the negotiations that led to Dodd-Frank, and now runs the pro-reform group Better Markets. Previously, he was a partner at the international law firm of Skadden, Arps, Slate, Meagher Flom, where he specialized in the S.E.C., securities, financial markets and corporate conduct in the United States and Europe. No one has been a more effective advocate of implementing substantive reforms.

Mr. Kelleher and his team are in the trenches every day, arguing on behalf of taxpayers and ordinary citizens at every opportunity before the entire range of regulators, in court cases and with Congress and the administration. They are also amazingly effective – particularly considering the huge resources of the firms that they go up against (for some examples, see this New York Times profile of Mr. Kelleher). His private and public sector experience and expertise are very highly regarded throughout the financial regulatory agencies and in the legislative and executive branches more broadly. He also has strong relationships on both sides of the aisle and would be likely to be confirmed.

At the start of this second presidential term, many people are optimistic that President Obama will finally push hard for meaningful change around Wall Street, including at the S.E.C.

Goldman Sachs, JPMorgan Chase and Citigroup were all big donors to the Obama campaign in 2008 (see this recent column by William D. Cohan), but they did not make the top 10 list this year. Now would be a perfect time for the president to clean up Wall Street with a strong S.E.C. that is focused on enforcing the law and overturning dangerous parts of the conventional wisdom.

Article source: http://economix.blogs.nytimes.com/2012/11/15/changing-the-conventional-wisdom-on-wall-street/?partner=rss&emc=rss

Today’s Economist: Simon Johnson: Why Are the Big Banks Suddenly Afraid?

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Simon Johnson is the Ronald A. Kurtz Professor of Entrepreneurship at the M.I.T. Sloan School of Management and co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

Top executives from global megabanks are usually very careful about how they defend both the continued existence, at current scale, of their organizations and the implicit subsidies they receive. They are willing to appear on television shows – and did so earlier this summer, pushing back against Sanford I. Weill, the former chief executive of Citigroup, after he said big banks should be broken up.

Today’s Economist

Perspectives from expert contributors.

Typically, however, since the financial crisis of 2008 the heavyweights of the banking industry have stayed relatively silent on the key issue of whether there should be a hard cap on bank size.

This pattern has shifted in recent weeks, with moves on at least three fronts.

William B. Harrison Jr., the former chairman of JPMorgan Chase, was the first to stick out his neck, with an Op-Ed published in The New York Times. The Financial Services Roundtable has circulated two related e-mails “Myth: Some U.S. banks are too big” and “Myth: Breaking up banks is the only way to deal with ‘Too Big To Fail’” (these links are to versions on the Web site of Partnership for a Secure Financial Future, a group that also includes the Consumer Bankers Association, the Mortgage Bankers Association and the Financial Services Institute).

Now Wayne Abernathy, executive vice president of the American Bankers Association, is weighing in – with a commentary on the American Banker Web site.

These views notwithstanding, mainstream Republican opinion is starting to shift against the megabanks, as former Treasury secretary Nicholas Brady makes clear in a strong opinion piece published in The Financial Times.

Mr. Brady was Treasury secretary under Presidents Ronald Reagan and George H.W. Bush, and to the best of my knowledge, no one has ever accused him of being any kind of leftist.

Yet Mr. Brady’s thinking in his Financial Times commentary is strikingly similar to the reasoning that motivated the Brown-Kaufman amendment (supported by 30 Democrats and three Republicans) in 2010, which would have put a hard cap on the size and leverage of our largest banks, i.e., how much an individual institution could borrow relative to the size of the economy. (See this analysis by Jeff Connaughton, who was chief of staff to Senator Ted Kaufman; Senator Sherrod Brown, Democrat of Ohio, is still pushing hard on this same approach.)

Mr. Brady also stresses that we should make our regulations simpler, not more complex. Senator Kaufman made the same point repeatedly – and capping leverage per bank (Mr. Brady’s preferred approach) would be one way to do this.

Mr. Brady is not alone on the Republican side of the political spectrum. A growing number of serious-minded politicians are starting to support the point made by Jon Huntsman, the former governor of Utah and a Republican presidential candidate in the recent primaries: global megabanks have become government-sponsored enterprises; their scale does not result from any kind of market process, but is rather the result of a vast state subsidy scheme.

As Paul Singer, a hedge fund manager and influential Republican donor, says of the big banks, “Private reward and public risk is not what conservatives should want.”

A second problem for the bankers is that their arguments defending big banks are very weak.

As I made clear in a point-by-point rebuttal of Mr. Harrison’s Op-Ed commentary, his defense of the big banks is not based on any evidence. He primarily makes assertions about economies of scale in banking, but no one can find such efficiency enhancements for banks with more than $100 billion in total assets – and our largest banks have balance sheets, properly measured, that approach $4 trillion.

Similarly, the Financial Services Roundtable e-mail on “Some U.S. banks are too big” is based on a non sequitur. It points out that United States trade has grown significantly since 1992, and it infers that, as a result, the size of our largest banks should also grow.

But the dynamism of the American economy and its international trade after World War II was not accompanied by striking increases in the size of individual banks, and our largest banks did not then increase relative to the size of the economy, in sharp contrast to what happened since the early 1990s.

In 1995, the largest six banks in the United States had combined assets of around 15 percent of gross domestic product; they are now over 60 percent of G.D.P., bigger than they were before the crisis of 2008.

The Financial Services Roundtable is right to point out that banks in some other Group of 7 countries are larger relative to those economies. But which of these countries would you really like to emulate today: France, Italy or Britain?

The Financial Services Roundtable also asserts, in its other e-mail, that the Dodd-Frank financial reform legislation and the Basel III new capital requirements have made the banking system safer. That may be true, although the evidence it presents is just about cyclical adjustment; after any big financial crisis, banks are careful about funding themselves with more equity (a synonym for capital in this context) and holding more liquid assets.

The structure of incentives in the industry hardly seems to have changed, as witnessed, for example, by the excessive risk-taking and consequent large trading losses at JPMorgan Chase recently.

We need a system with multiple fail-safes, and making the largest banks smaller and less leveraged would achieve precisely that goal.

Mr. Abernathy’s article takes a much more extreme position. He contends that banks are already unduly constrained – by Dodd-Frank and Basel III – and this is holding back economic growth.

Mr. Abernathy goes so far as to say that if the banks were to raise $60 billion in additional equity capital, this “holds back $600 billion of economic activity.” In other words, strengthening the equity funding of banking would cause an economic contraction on the order of 4 percent of G.D.P.

Such assertions are far-fetched, not based on any facts and have been completely discredited (see the work of Anat Admati and her colleagues on exactly this point). Mr. Abernathy was assistant secretary for financial institutions under George W. Bush. If he has any evidence to support his positions – a study, a working paper, a book? – he should put it on the table now.

To make such assertions without substantiation is irresponsible. (A document from a lobbying organization would not count for much, in my view, but let’s see if he has even that.)

The big banks and their friends should be afraid. Serious people on the right and on the left are reassessing if we really need our largest banks to be so large and so highly leveraged (i.e., with so much debt relative to their equity). The arguments in favor of keeping the global megabanks and allowing them to grow are very weak or nonexistent. The arguments in favor of further strengthening the equity funding for banks grow stronger – see the recent letter by Senators Sherrod Brown and David Vitter, which I wrote about recently.

The views of sensible people like Secretary Brady, Senator Kaufman, Governor Huntsman and Senator Brown are spreading across the political spectrum.

Article source: http://economix.blogs.nytimes.com/2012/08/30/why-are-the-big-banks-suddenly-afraid/?partner=rss&emc=rss

Merkel and Sarkozy Stress Growth

Following a meeting in Berlin with President Nicolas Sarkozy of France, Chancellor Angela Merkel of Germany also urged Greece and its private creditors to quickly agree on the restructuring of the country’s national debt.

Otherwise, she warned, it would not be possible for Greece to receive its next batch of bailout cash. In October, the euro zone agreed to a second bailout for Greece that involved the country’s private creditors accepting a 50 percent reduction in the value of their holdings of Greek debt.

She added that both she and Mr. Sarkozy wanted Greece to receive the money.

“We want for Greece to remain in the euro zone,” Mrs. Merkel said.

The two leaders also called for faster payments into the euro zone’s permanent rescue fund, known as the European Stability Mechanism, in an effort to bolster confidence, and for a quick conclusion to negotiations on a treaty with new fiscal rules, the basis of which leaders agreed to at a summit last month.

Germany has insisted on austerity measures in the euro zone’s fight to lower budget deficits and regain investor confidence.

They two leaders also told reporters that Europe should compare countries’ labor market practices and learn from the best, and for European funds to be used in a way that could create jobs.

Article source: http://feeds.nytimes.com/click.phdo?i=92ccd7236a32f8ecd673811184ac27b5

You’re the Boss Blog: A Weekly Roundup of Small-Business News

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A weekly roundup of small-business developments.

What’s affecting me, my clients and other small-business owners this week.

First of all, Justin’s fine. Just fine.

The Economy: A New Head Is Named

The president names Alan Krueger the new head of his Council of Economic Advisers. Brian Proffitt says he may be good for small businesses. The American Small Business League writes him an open letter. Jared Bernstein likes him, too (but then again he thinks the stimulus worked). Many expect Mr. Krueger to push for more stimulus.

The Deficit: A National Debt Primer

Brad Plumer say it’s not too late to do nothing. Brad DeLong argues for keeping spending low. John Steele Gordon gives us a short primer on the national debt that concludes: “If the country can experience G.D.P. growth equal to what we had in the 1990s, the debt-to-G.D.P. ratio would drop, in just a decade, to 56.7 percent, about where it was in 2000.” The Economist Mom wants the “super” committee to raise taxes. Ramesh Ponnuru wants to lower them.

The Data: Too Many Buts, Not Enough Jobs

The unemployment rate stays the same as the government reports no new jobs were created. But A.D.P. says 91,000 jobs were added in August. But small-business hiring slowed in August. And employees worked fewer hours and received less money. Consumer spending and income jumped in July. But consumer confidence fell to a two-year low. Home prices continued their double dip. But bank lending increased. Pending home sales slipped in July but are up sharply from a year ago. Texas manufacturing activity was unchanged in August. Ford’s sales rose 11 percent. Hurricane Irene could cost insurers up to $3 billion (and washed up a monster!).

The Economy: A Little Optimism, a Lot of Paper Clips

Brett Arends says American companies are now more leveraged than at any time since the Great Depression — and then gives us 10 reasons to be optimistic. Small businesses may be rebounding, according to one survey. Retail employment rises in two-thirds of metropolitan areas. Brian Wesbury says stocks are undervalued (pdf) by 65 percent. Mark Perry contributes a roundup of positive economic news and reports that three-year inflation is the lowest in 54 years. A study finds small-business bankruptcy numbers are down. The American paper-clip market is huge. And here’s the very best news of all!

Starting Up: Boomers to the Rescue

A new report finds that the No. 1 reason start-ups fail is because they scale prematurely. Baby boomers account for 84 percent of new businesses, and one of them decides to scrap retirement for the start-up life. Start-up activity among unemployed managers and executives in the first half of 2011 fell to its lowest level on record. More than one million self-employed Americans are no longer in business almost four years after the last recession began. Ryan O’Reilly says the start-up visa could help. A start-up automates the process of starting up. Monica Rogati sequences the DNA of a start-up. Microsoft hosts a mega start-up event.

Red Tape Update: Obama’s Ozone

The House majority leader, Eric Cantor, lays out his party’s antitax and antiregulation agenda for the fall. Or was that Barack Obama’s agenda? Representative Sam Graves says the White House regulatory review is “appreciated, but doesn’t go far enough.” Hayden Murray says the E.P.A. chokes business. But not all small businesses believe they are over-regulated and over-taxed. Megan McArdle writes about the death of a D.C. tavern: “Punishing a restaurant owner for a liquor license violation with an open-ended maybe-we’ll-give-you-a-license-maybe-we-won’t delay is equivalent to giving someone the death penalty for a parking violation. Moreover, it punishes the neighbors and the employees right along with the owner.” Scammers are posing as FEMA reps. James W. Lucas reminds us that “the Federal Register for 2010 is over 81,000 pages long, a 19 percent increase in one year.” California legislators take aim at baby sitters. The N.L.R.B. issues a union-friendly regulation. A tax expert offers the best way for the owner of a corporation to claim a home-office tax deduction.

Marketing: E-Mail and Daily Deals Decline

E-mail marketing was down 14.3 percent year-over-year and George Bilbrey reports that spam also declined. The Atlantic reports that people seem to be getting sick of daily deals with traffic slipping for both Groupon and LivingSocial. Facebook and Yelp are dumping their daily deals. Laurie McCabe explains how to maximize our Twitter event hashtags. Rene LeMerle offers seven tips for better Twitter marketing. Evan Carmichael lists 50 top social media blogs. Lewis Howes explains how to convert Web traffic into customers. Here are four mistakes of the search-engine optimization novice. A cool graphic suggests small businesses must optimize or die. Check out this webinar on how to create engaging content to generate leads. In this video, John Jantsch explains how to succeed online. Google announces an effort to help companies do business online. Women click Facebook ads more than men. Eighty percent of consumers report that they have changed their minds about a purchase after reading a thumbs-down report. Scott McKain says that publicity is not the same as marketing.

Management: Why Customer Service Is Important

Inc. releases its list of fast-growing companies. Score shares 10 mistakes that hurt small businesses, including “heavy dependence on just one of anything.” Tony Johnson suggests 10 ways to make money from home. A new service lets 7-Eleven customers pay online bills with cash. Startups.com’s founder will inspire you. Office Depot announces the finalists for its official small business of Nascar contest. Isabelle Mercier Turcotte lists eight rules guaranteed to increase your sales. Infusionsoft’s chief executive says customer service is important to a small business.

Ideas: The $11 Bottle of Water

The world’s seven billionth person is on the way. A pedal-equipped school bus is powered by kids. Future Fords may run on the cloud. Eric Ries says ideas are overrated: “We still believe that entrepreneurial success is about being in the right place at the right time with the right idea. But there’s no empirical evidence that’s true.” An online florist announces a name the bouquet contest. A restaurant offers a menu for bottled water.

Your People: Maybe It Is Rocket Science

An astrophysicist in Illinois figures out how to board an airplane. Doug Davidoff says the most important thing to remember when hiring salespeople is to “stop sounding like every other company that treats salespeople like a commodity.” The Evil HR Lady warns against making someone salaried to avoid overtime payments. A recent survey finds that only 9 percent of corporate travel managers will reimburse for goodies from in-room minibars, (and 4 percent said they reimburse for the costs of in-room movies and other entertainment). Lifehacker’s Alan Henry lists the best credit cards for travel rewards. The “Catch Me If You Can” guy explains how to avoid check fraud.

Around the States: Amazing Business Owners in Joplin

In Wisconsin, there’s a rash of restaurant failures. FEMA’s Dan Stoneking meets some amazing business owners in Joplin, Mo. Gov. Jerry Brown reveals a $1 billion tax relief plan for California businesses. Washington’s Economic Partnership presents its 2011 Small Business Awards.

Around the World: A Dutch Treat

Michael Pettis predicts, “Chinese growth will begin to slow sharply by 2013-14.” Willis Wee reports on the amazing start-up scene in India: “Many of these folks are very technically gifted, showing that there is a reason why Bangalore is called the Silicon Valley of India.” The Dutch National Wheelchair Basketball team shows what perseverance is all about.

Technology: Do QR Codes Work?

Hey fellow geeks: you be the judge. A Pittsburgh Marriott bans phones. Skype introduces a new phone adapter for home offices. Growing numbers of small businesses cut costs with server virtualization. Scott Rankin explains how to tell if tablet computers are right for your business. Dell offers hosted applications for small businesses. Joan Voight wonders if QR codes work for us.

The Week Ahead: Obama’s Speech

After some bickering, President Obama plans a major speech on jobs and the economy. Congress returns from its August recess. Wall Street will be watching the release of the purchasing managers’ Index, weekly unemployment claims, and trade balance data.

This Week’s Bests

Way to Find an Edge: Julien Smith argues that the secret to your success may be to act more like you’re criminally insane: “If you are looking for an edge and you can’t find one, ask yourself what you would do if you were a criminal, or a sociopath, or had delusions of grandeur, didn’t think you could fail, or that there would be no negative consequences.”

Reason to Watch ‘Glee’: James Miller describes the entrepreneurship of “Glee”: “It is a testament to the entrepreneurial spirit of providing a good or service that is in high demand. For those like myself who have a keen interest in pop music, the producers do a phenomenal job bringing out the best in the songs they cover.”

Reason to Keep Things Simple: Joseph Putnam thinks we may be giving our customers too many choices: “Google is the number one visited site on the Internet, yet they’re still able to limit their home page to a single action. … They don’t distract visitors with other options. Once you land on the site, you just have to decide one thing: What am I going to search for today? How’s that for not giving customers too many choices?”

This Week’s Question: Have you tried limiting the choices you offer your customers?

Gene Marks owns the Marks Group, a Bala Cynwyd, Pa, consulting firm that helps clients with customer relationship management. You can follow him on Twitter.

Article source: http://feeds.nytimes.com/click.phdo?i=06d66f182beb3462fb194838a4f8db19

2 Republicans Open Door to Increases in Revenue

One of the senators, John Cornyn of Texas, said he would consider eliminating some tax breaks and corporate subsidies in the context of changes in the tax code, provided there was not an overall increase in taxes.

“I think it’s clear that the Republicans are opposed to any tax hikes, particularly during a fragile economic recovery,” Mr. Cornyn said on “Fox News Sunday.” “Now, do we believe tax reform is necessary? I would say absolutely.”

But he insisted that any changes in taxes be “revenue neutral,” meaning that the government would not take in any more money from individuals or businesses than it does now.

The other senator, John McCain of Arizona, said he would be willing to consider some “revenue raisers” as part of a broad deal, but he refused to name specific measures.

Mr. Cornyn, a member of the Senate leadership, also said that Republicans would be open to a short-term deal on the debt ceiling to provide more time for a comprehensive agreement.

“The problem with a minideal is we have a maxi-problem,” he said. “And the big problems aren’t going to go away if you cut a minideal. All it does is delay the moment of truth. And so I’d say better now than then. But if we can’t, then we’ll take the savings we can get now, and we will relitigate this as we get closer to the election.”

The White House had no comment on the senators’ remarks.

Last week, President Obama harshly criticized Republicans lawmakers for refusing to eliminate tax breaks like those for private jet owners, hedge fund managers, multinational oil companies and ethanol producers. He argued that eliminating such loopholes could save billions of dollars and help fix the short-term federal deficit and long-term national debt.

The administration and Congressional negotiators are racing to find a deal to raise the federal debt ceiling of $14.3 trillion by Aug. 2, when the Treasury Department says the United States will exhaust its ability to borrow money and could default on some obligations. A bargain must be struck at least a week before then to provide time for a Congressional Budget Office analysis and for both chambers to vote on it.

Mr. McCain said Sunday that closing the tax breaks that Mr. Obama mentioned would have a negligible impact on the nation’s fiscal condition and would defy the will of the voters.

“The principle of not raising taxes is something that we campaigned on last November, and the result of the election was that the American people didn’t want their taxes raised and they wanted us to cut spending,” he said on the CNN program “State of the Union.”

He added that his fellow Republican senator from Arizona, Jon Kyl, a member of the budget negotiating team, had said there were certain measures that Republicans would consider, and that he was open to them. He refused to name any.

Mr. Kyl said he would be willing to consider some increases to help bring down the deficit. “We’re perfectly willing to consider those kinds of issues in the context of tax reform, which we would very much like to do,” Mr. Kyl said last week on “Fox News Sunday.” “But we’re not going to have the time to do it or be able to do it in order just to raise revenue as part of the exercise, which should be about reducing spending.”

Article source: http://feeds.nytimes.com/click.phdo?i=51f4e9bf8f544fbdc1daa7775ef0506a