Morning News - Don't Give Up Edition

by Kevin Ganster

Former Fed Chairman Paul Volcker suggested the failures in the credit markets were widespread, ranging from regulation to basic economic problems such as the rising U.S. trade gap. He endorsed the idea of the Fed becoming the principal financial regulator, although he cautioned that the central bank "is not equipped to do it now." He said a greater oversight role for the Fed would require the creation of a new position filled by an official who is held accountable. But he suggested that the needed regulatory changes will not be easy to accomplish.

"The life of a regulator is not a happy one. When things are going well no one wants to be regulated. When things go bad, everyone asks, 'Where were you?'"

Volcker said it was important that the Fed retain a central role in regulating banks in order to be able to respond quickly to a crisis. But he also suggested that it would be a good idea that the Fed didn't become the sole financial regulator in the name of regulatory streamlining. "One consolidated financial regulatory agency is a very powerful institution, for good or bad," he cautioned.

Sen. Barack Obama offered some opinions about the housing crisis yesterday, likening parts of it to the Great Depression. He said the crisis resulted from a lack of regulation of mortgage lenders and investment banks.

Here’s a rarity – a story about declining CEO pay. A new study by Mercer shows CEO compensation at the biggest U.S. corporations dropped sharply last year, reflecting in part the rough business conditions at top-tier banks and other large financial firms. The study looked at pay data in annual proxy filings for 350 companies of varying sizes and industries in the Fortune 1000. Pay for CEOs of 50 large U.S. companies -- companies with median annual revenue of $66 billion -- took the sharpest cut in total direct compensation in the last fiscal year on a percentage basis, down 15.8% from the previous year.

John Edwards endorsed Barack Obama last night, saying voters had decided he should be the nominee and so had he. While heavily courted by both camps, the endorsement was a surprise inasmuch as Mrs. Edwards had been very critical of Obama’s health care plan. Edwards 19 delegates may or may not pledge themselves to Obama.

The latest polls have Clinton comfortably ahead in Kentucky and Obama comfortably ahead in Oregon. The latest Quinnipiac University poll has either Democrat beating John McCain – Obama by 7 points and Clinton by 5 points.

Should he win, John McCain said this is what the world would look like after his first term is completed: "spasmodic" but reduced violence in Iraq and Afghanistan; Osama bin Laden dead or captured; government spending curbed by his ready veto pen; a simpler flat tax; illegal immigrants living humanely under a temporary worker program; and political partisanship stemmed by weekly news conferences and British-style question periods with joint meetings of Congress. He also promised an end to partisan rancor. He said,

“I'm not interested in partisanship that serves no other purpose than to gain a temporary advantage over our opponents. This mindless, paralyzing rancor must come to an end. We belong to different parties, not different countries."

Former Majority Leader Dick Armey has an op-ed in today's Wall Street Journal warning Republicans not to cede ground on health care to the Democrats in 2009, but instead more aggressively tout their visions of a system with more provider competition, consumer choice, and personal responsibility.

Zachary Karabell, president of River Twice Research, had an op-ed in the Journal yesterday asking what’s happened to America’s can-do spirit and optimism? He acknowledges that the current financial morass is deep and painful, but its hardly the worst crisis we’ve ever faced in modern times. Something else is going on, he says, namely a cultural rut of pessimism that is draining our collective energy, blinding us to possibilities, and eroding our position in the world. He says we lost something so simple and so essential that it is easily overlooked: the belief that we can achieve anything. He writes:

“That used to be the defining feature of this country, one that peoples throughout the world marveled at and envied. Today, the economy and the American political system are seen in almost entirely negative terms, and in need of drastic reform. Perhaps it is a strength to be able to be so self-critical. But there is a fine line between self-criticism and self-excoriation … Our deep pessimism and fear places us at serious disadvantage globally. The path to a more balanced view of ourselves is impossible to chart, but the first step is surely to have better perspective on where we are and where we have been …Unfortunately, the problem with downward spirals is, well, that they spiral downward. There is little evidence just now that we are about to break this cycle, and until we do, we will watch in awe, envy, and fear as peoples throughout the world do what we used to do so well.”