Simon Johnson

The Folly of Trumponomics

Donald Trump’s administration will implement large tax cuts and substantial financial deregulation. President Trump may also change U.S. policies on trade, although precisely what he will do is less clear—and the shift may be more rhetorical than real. Trump is also likely to substantially cut or privatize federal spending. To the extent that his policies add up to a coherent economic strategy, they are reminiscent of Ronald Reagan’s, but with an extra dose of cronyism and the wild card of economic nationalism.

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What Is Citigroup Hiding From Its Shareholders Now?

In the early and mid-2000s, Citigroup had compensation practices that can fairly be described as a disaster for shareholders (and for the broader economy). Top executives, such as then-CEO Chuck Prince, received big bonuses and generous stock options. Lower level managers and traders were paid along similar lines. These incentives encouraged Citi employees to take risks and boost profits. Unfortunately for shareholders, the profits proved largely illusory – when the dangers around housing and derivatives materialized fully, the consequences almost destroyed the firm.

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How the Stupidest Bank - Citibank - Controls Our Economic Policies

Citigroup is a very large bank that has amassed a huge amount of political power. Its current and former executives consistently push laws and regulations in the direction of allowing Citi and other megabanks to take on more risk, particularly in the form of complex highly leveraged bets. Taking these risks allows the executives and traders to get a lot of upside compensation in the form of bonuses when things go well – while the downside losses, when they materialize, become the taxpayer’s problem.

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Break up the Big Banks and End the Oligarchy on Wall Street

There is widespread agreement that the financial crisis which broke out in September 2008 was our most severe in over 50 years.  There is also a consensus that, whatever other factors may have been involved, the excessive risk-taking and general mismanagement of huge banks at the center of our economy played a significant role in what happened.  (Yes, of course the largest banks themselves deny any responsibility – including most recently using insulting language.)

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Dems Might Pass Financial Reform That Does Nothing to Protect from Big Threats to Our Economy

The New York Times reports that financial reform is the next top priority for Democrats. Barney Frank, fresh from meeting with the president, sends a promising signal,

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