Wednesday, November 26, 2014



在查尔斯·弗格森(Charles Ferguson)获得奥斯卡奖的纪录片《监守自盗》(Inside Job)的片尾,他采访了几位著名经济学家,问他们怎样看待自己收取2008年危机爆发前献金为金融部门的过度冒险和卑鄙交易呐喊助威的行径。这些学术大腕中有不少收受了为数巨大的报酬,为大银行和其他金融企业奔走打点。弗格森的纪录片及其发人深省的近著《掠食者之国》(Predator Nation)指出,许多献金至今都没有被完全披露。





在最近的商品期货交易委员会(CFTC)圆桌会议上,坐在我旁边的银行部门代表引用了一篇某斯坦福大学著名金融学教授的论文支持其反对特别监管的立场。这位银行家没有提到的是,该教授写这篇文章收取了游说集团证券业和金融市场委员会(SIFMA)五万美金的报酬。该教授是达雷尔·达菲(Darrell Duffie),他披露了这笔费用的数额并将其捐赠给了慈善机构。


大概是因为斯坦福大学拥有杰出的地位。作为一个机构,斯坦福大学做出了不少杰出成就。其师资力量全球领先。当一位教授为某行业集团撰写论文时,该行业便能从大学的名气和声望中获益——从某种程度上说,得到了租金(rent)。在引用该论文时,银行家和CFTF自然会强调“斯坦福”的名号。(我并不是在点名批评斯坦福大学;事实上,其他斯坦福教师,包括安纳·阿玛迪(Anat Admati)一直奔走在推行明智改革的前沿。)


正因如此,我对《华尔街日报》对哥伦比亚大学校长布林格(Lee Bollinger)的采访十分失望。布林格是纽约联邦储备银行“C级”董事——美联储任命代表公众利益的董事。





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    1. CommentedKuruvilla Abraham

      Simon Johnson could perhaps be spot on. In response to it is argued that stock markets are modeled, in accordance with the Kelly criteria, as a game of repeated trials. Which in terms of simple analogy means that a young child has to repeatedly fall to learn what the safety limits of a garden swing are? Be that as it may, the young child is confident that the physical limits once learned cannot be easily tampered with. He or she and the nannies (market regulators) know in advance what the limits and restrictions are. The same cannot be said of the stock market for any rigging, which is generally transparent to the investor and its pernicious consequences are known to the investor only after the damage is done. What is worse is that the riggers know and they are the consistent gainers on the upside and the down side.

      Further, without any limit to the number of players (investors) in the ring (on the other hand trapeze rings have limits to the number of artists it can hold) and with one ring being linked to another and that to another across the world, across time zones, I wonder if any of them, Kelly, Hull or White will be able to rationalize and justify the legitimized but specious gambling dens that stock markets are. It is not just the laws of physics or quantum mechanics that do not apply; the guiding principles of ethics also do not seem to apply. And as Raghuram Rajan surmises, at the crunch the nannies and curators (Stock Market watchdogs) are easily distracted by their own chatter.

      It could have been so once, but in an allegedly civilized world all is no longer fair in love and war. Hundreds of the guilty may go unpunished but no innocent should be convicted. Considering the futility of war, the argument of sacrificing hundreds of foot soldiers or innocent jihadists for the larger good is no longer acceptable. The right of governments to wantonly take shelter under any eminent domain is being seriously questioned. Thus, theorists and modern day soothsayers need to factor in such maxims and tenets into their mathematical models if they are to be called civilized models and not necessary evils. It is thus not a question of romancing financial markets but that of civilizing them.

    2. CommentedEdward Ponderer

      Direct cash flow is hardly the only profitable collusion between the private sector, academia, and the government. Similarly scandalous activity has been long ongoing, and if anything, accelerating, in the perpetual hyping of "shortage" in science and engineering -- while tens to hundreds of well-qualified people vie for every job, so that the "creme de la creme" may be gotten locally, or imported, for a bargain price And there is no need to discuss what is happening to new lawyers nowadays. Etc., etc., etc.

      The reality is that as the world becomes more complex, global, interconnected, there comes before the world, two paths.

      If continuing on the "every man for himself path," the smartest, wealthiest, and best connected (in a selfish sense) will evermore -- as an uncontrollable lust -- manipulate in order to amass power, wealth, and prestige, far beyond anything a normal happy, secure human being would enjoy. In fact, since this far transcends actual objective needs, it is ultimately a relative matter -- becoming competition for competitions sake. There comes a sinister "feel good" at the crushing of others, of "how well" one does compared to them.

      But there is another path, and that is to naturally fit globalization as a whole in conscience interconnection. It is a path of openness and integral education, of round table discussion and action in terms of creating new cultural values of mutual concern and responsibility. In it, we develop oput of the addictions in the mutual self-help form of the Alcoholics Anonymous and OverEaters Anonymous associations.

      The former path is a cancer of this fetus-like globalization of the body Humanity. The end of this path is not good, least of all for the cancer that must bear the responsibility for its own destruction along with all others that it has mercilessly exploited.

      The latter is a conscious evolution into a new, family-like behavioral economics -- a bottom-up supportive, accelerated healthy growth of that fetus in a full-fledged Humanity. And who can begin to imagine the greatness of such a new Humanity -- its ability to work with Nature rather than against it, maintain a homeostasis through real-time reaction across a vast neural net. We see this on the even in the chemical-level association of independent bacteria into megacolonies (see for example: "Learning From Bacteria About Social Networks"
      "The Social Lives of Bacteria" Indeed, in our human Internet and beyond level of communication and corporate thought, can we imagine what we can become!

    3. CommentedMisaki H.

      If economists benefitted from Wall Street's success, they are hardly the only acomplices. This story suggests that the entire US government is to blame:

      An explanation of how government policies, specifically inflation, are instrumental in Wall Street's profits and how to fix the situation:

    4. Commentedsande cohen

      I taught at 3 elite institutions between 1973-2009. The control by professors of peer-review was to the benefit of small groups which also controlled the 'best' journals of publication. The reproduction of a small number of institutions, especially securing posts for their students, has made a mockery of peer-review. In her book on the subject, M. Lamont said that peer-review can't be reviewed--it is too local--but the reception of grant money is a sure sign of the health of an institution and the assignment of research projects. Transparency would dissolve our institutions....

    5. Commentedpeter fairley

      I don't buy the 'predatory mortgage lending' concept. US Mortgages are 'non-recourse loans'; the homeowner wins if prices rise, and can walk away from the debt if he is foreclosed on. He is in partnership with the bank; homeowner is virtually selling house in advance to the bank in a refinance, similar to a retirement mortgage, but even more cash now for a refi, plus a place to live. With alt-a refinance the homeowner can reduce monthly payments for years then say F.U. to the bank later. With subprime liar loans, homeowner can lie and get cash on refi's and later say F.U. to the bank.
      I do think the bank executives were incompetent or corrupt in profiting from homeowners robbing the bank like this, but government regulators, and left wing politicians, & academics were of a similar mindset in advocating too easy credit for 'the people' or 'the needy' and too much govt deficit spending.
      Please excuse F.U. vocabulary, but I am trying to be concise and get a point across.

    6. Commentedpeter fairley

      This essay should be seen in social context where it is difficult to even bring someone like Niall Ferguson into a discussion without someone getting angry and dismissing him as a 'neo-con'.How much Predator Economics really happens?
      In developing countries we see childish elites in government in stupid arguments,pointing fingers at other parties, saying others are to blame and the effect of less productive dialogue; the less we do that in modern world the better.. ...Is the author trying to define a new censorious idiom? similar to the 'nazi eugenicist' censoring that got thrown at Larry Summers for daring to mention genetics and females in same paragraph?

    7. Commentedpeter fairley

      Were New England academics banging the table during the Real Estate bubble about too easy credit, subprime & negative amortization loans? about the possibility of a DOWN RE market as well as an UP market? No. They were banging the table and signing formal letters from their colleges that Larry Summers, president of Harvard was sexist and should be censored, or worse. I believe Paul Krugman did write one article for the NY Times with a mild warning but this tended to be lost in much more numerous Republican bashing articles. There are many left wing Professors of Economics, who have a big following in the media, their own colleges and off campus speaking engagements. Where were they during the Real Estate bubble? They were collecting higher and higher salaries the same as the conservative Professors of Economics. Much of that financed by government deficit spending, & homeowner refinancings. Did many bang the table and cite Keynes that deficit spending in boom times dangerously exagerates the business cycle? I think not. The liberal consensus was that we needed more government spending regardless of the deficit.

    8. CommentedAlexander Shilyaev

      This is really a very timely article. Especially in the light of redesigning of corporate governance structures. The institute of so called independent directors has revealed its weak points. Such members of the boards are eager to part with their independent status very often bending to one or another powerful lobbying groups. The author's discontent is understandable because universities professors are marching in the forefront of independent directors armies. So, here are some questions: How can their independence be sustained and guaranteed? Or should not universities' faculty staff be excluded from lists of eligible persons/professions who may be appointed on the boards of directors...

    9. CommentedDavid Joseph Deutch

      Simon, I feel that you are confusing the cause and the effect. Rather than banks pushing economists in the direction of this kind of behaviour, economists, through their policy recommendations and ideas about the market, allowed banks to begin acting like this.

    10. CommentedLarry Gerber

      Just over a week ago, the American Association of University Professors released a lengthy report entitled "Recommended Principles & Practices to Guide Academic-Industry Relationships" that directly addresses the issues raised by Professor Johnson. It is intended to provide specific policy guidelines to avoid the kinds of conflicts of interest that Professor Johnson appropriately criticizes.

      I quote below from the AAUP press release. The full report can be found at

      The AAUP is pleased to issue this comprehensive draft report, Recommended Principles and Practices to Guide Academic-Industry Relationships, for public comment. Responses may be directed to After a review of the comments received, the report will be revised as appropriate.

      This is one of the longest reports that the AAUP has ever produced. It deals with issues that are in the news every week and that are having a critical impact on higher education in the United States and across the world. The days when industry-funded research was concentrated in a limited number of universities have passed. Every type and size of institution is now faced with both the opportunities and the responsibilities that such research relationships entail.

      The report opens with a summary of recommendations regarding the principles that colleges and universities should adopt, as appropriate, in their governing and advisory documents and in their contracts with outside funders. The main body of the report follows, beginning with an overview of the history and current state of engagement between industry and the academy. The balance of the report discusses each of fifty-some recommendations and guidelines in much greater detail, offering not only rationales for them, but also documentation and qualification. Those involved in reviewing, adopting, and implementing these recommendations should benefit from the detailed information provided. An appendix summarizes sources for each of the recommendations and notes those that are new to this report or modified from other sources.

      The report urges that faculty governing bodies have greater authority over the principles regulating outside funding and over the disposition of inventions derived from faculty research, but it is by no means exclusively an assertion of faculty rights. It specifies—and emphasizes—the responsibilities that must come with outside funding, among them the public disclosure of all financial conflicts of interest. Not all will readily embrace those responsibilities, but the time has surely come when every institution needs to debate and consider them.

      This report began with a 2010 decision by Committee A on Academic Freedom and Tenure to examine the area of concern. A small group met early in 2011 to draft a brief set of sample recommendations. The resulting discussion helped reveal the scope and challenges of the project. Jennifer Washburn, an investigative journalist familiar with the relevant literature, was invited to help prepare a full report in conjunction with the AAUP president.

      Please note that the report is an uncorrected draft.

    11. Commentedphilip meguire

      1. An academic's university home page shall contain a list of all consultancy contracts entered into, including the payment therefor.

      2. The minimum downpayment required to purchase real estate shall be 20%. The Fed shall have the authority to increase that percentage at any time, by any amount.

      3. The deductibility of interest on home equity loans shall be abolished forthwith.

      4. A firm enjoying any form of deposit insurance cannot purchase financial derivatives except as these are listed on an exchange and are marked to market daily. Such derivative contracts shall be based on a readily observable cash market price or index.

      5. Any bailout of a bank or the like shall require that the current stockholders fall on their swords. Ditto for the holders of debentures issued by bank holding companies. I.e., the bank must be recapitalised. The stockholders must be risk bearers of first resort.

    12. CommentedGerardo Canto

      Great article. JP Morgan and Government subsidies clarified

    13. CommentedFrank O'Callaghan

      This is a clear and rational statement by Professor Johnson. It's content is something that most reasonable people would see as balanced and fair. It points at a danger that threatens any free society: the most respected intellectual institutions of a society can be rented and discredited if there is not a robust defence of their standards and independence.

      We must all be grateful for his speaking out on this matter.

    14. CommentedGreg Rushing

      Excellent article. Banks that government decides are "too big to fail" are no longer subject to the normal rules of free market economics. These firms now have more in common with corrupt and politically connected Russian or Chinese "state enterprises" than they do with free market firms. That's because true free market firms are allowed to fail. Ordinarily, this risk of failure is supposed to incentivize management to prudently manage their risks. But when there is no risk of failure (or a large golden parachute), then management has nothing to lose by taking reckless bets with shareholders' money. It is an agency problem. 

      To paraphrase the WSJ article questioning Lee Bollinger "The people who run global megabanks get the upside when things go well – they are paid based on their return on equity UNADJUSTED FOR RISK, so they prefer a lot of debt piled on top of very little equity. Doing this maximizes a portfolio's leverage. When things go badly, the downside is someone else’s problem – in the first instance, typically, the Federal Reserve’s. Ultimately, society pays the price for this distortion of the market clearing mechanism."

      Another important fact to consider: Enron was not a Texas company any more than General Motors can be said to be a Detroit company. Similarly, none of the giant investment banks are truly New York firms. All of these companies were infact incorporated in the state of Delaware.  Why? Because Delaware corporation laws are the most management friendly in the nation. Delaware laws of incorporation allow unethical managements to enrich themselves without accountability to shareholders. People don't realize this fact, but it is lax state law regulating corporate governance that permit the Dennis Kozlowskis and Bernie Ebbers of the world to act with impunity until it is too late. again, it is a simple agency problem.

    15. CommentedGerardo Canto

      The subsidization of mega-banks through society and the government.

      I think the author could clarify how these subsidies function with what I assume to be interest rates and the opportunity cost of diverted tax-payer money in the short-term. From my current understanding, though hesitantly yielding to my intuition, banks are on the recovery to fully paying down bail-out funds as deleveraging occurs. Bank of America, for instance, has paid down the balance of government money as they continue to service mortgages and collect on outstanding debt.

      Fixated still upon this intuitive suspicion, I similarly question the role of political contributions in shaping banking regulations: advocacy for the freer movement of money is funded by its profitability awarded to loan and investment institutions in the short-term. This lobbying or rent-seeking, when influential, disbands capital requirements with a concerted effort i.e. intrusive contributions or the tooled manipulation of academics or any other permeation into the ostensibly reliable ranks of isolated rating agencies. But from here, however, I cannot see a direct link between government expenditure and JP Morgan's recent loses, at least in this essay explicitly.

      Banking is a public good to the depth it functions with the fundamental drivers of our economic well-being such as investment and saving. The government therefore has an obligation to ensure its health and efficacy. But in providing a short-term tax payer bailout after the 2008 banking crisis we shielded the careless and fraudulent activities fueling the boom period from being severely punished.

      And still today we see little stringency upon regulation and transparency that could better pin-point illegal instruments of rent-seeking that hide, in the form of proprietary secrets and convoluted debt-packages, the real risks that ultimately have consequences on the composition of commercial loans and the levels of confidence, voiced through the government and a variety of rating agencies, in the capital debt markets. Transparency is key, and when it is obscured throughout far-reaching leverage, not even the central banks could resist further extending the credit lines. It seems, and insomuch I agree, that it was probably a combination of hidden information on JP Morgan's balance sheet and its risk-bearing assets that caught the previously responsible investment bank off-guard. But without pressing upon federally insured funds, how does this result in government subsidization?

      An obvious problem seems to be the overlap of the political sphere with the banking industry, most potent within the central banking system. Managers of major private banking institutions simply do not have a role on the regulative board of a central banking system because their direct monetary intercourse with the procession of these stipulations keeps them from staying unbiased and uninvested. It seems furthermore that political contributions work against this ideal.

      These managers, in gaining access to policy circles and receiving protection from bankruptcy after their risky investments, are politically dazed by short-term self-interest rather than long-term sustainability at smaller profit margins. I think the baseline solution is to impose strict separation of federally insured funds and those other monies used to create leverage. If these funds were not so heavily sold off and repackaged, speculation would not as drastically lopsided the asset sheets of these multi-purpose institutions. This, along with much larger capital requirements, would have materialized the liquidity to a larger proportion of deposit demands, allowing for a tougher market slam to this back-door flipping of deceptive mortgage-backed securities and other debt packages as only a half-hearted government resuscitation intervened for the exacting purpose of a public guarantee.

      I hear those remarks still lingering which place the functionality of our entire banking system on the willfulness of the wealthy to continue crediting and making investment. This implies that only due to the massively disproportionate wealth held in their hands do we continue to see their express condolence. That is absurd. These bankers will continue to disperse their money to its most profitable location, and that does not mean hoarding it oversea, even after the crisis as such. More responsibility needs to be placed on their back through the regulations that can signal this reoccurrence, consequently chipping at some of their risk-bearing profits, as well as with debt forgiveness and readjustment. This is where government aid is most useful, and Obama has made that agenda clear.

      So it seems from this depiction that government subsidies occur as a byproduct of that greased locomotion which circularly drives deregulation with overbearing political contribution in the form of transfers and political positions and back again. These exercises are conducted by the political-economic floodgate operated by the directors of our central banks. It is here we fund government debt and route capital transfers with interbank loans. It is from here, in the midst of the housing crisis, where the lifeblood pumped into organs degraded by poisonous debt.

      Given that these loans are supplied with the expectation of full repayment, at low interest rates nonetheless, where is the government subsidy: is it the relative inefficacy of this expenditure to one arguably more publicly beneficial: did we simply reinforce the corporatism that remains risk-averse by a government sanctified push of debt totally onto the adjusted backs of middle-class America, in effect subsidizing loss at their cost?

      It is clear that the failure of risk-borne investment did not weigh on the pockets of these bankers that now bathe in this political-economic pool of luxury. If these are the indirect externalities framed here as the basis of a government subsidy it has not been substantiated along the lines of opportunity cost of government expenditure nor the other intricate forms of risk-aversion or tax foregoing or any other means to pad the wealthy pockets when they should otherwise be infiltrated and restructured.

      It seems that our government subsidized the banking industry in covering their risk because they are too big to fail. Again, pertinent solutions necessarily involve capital requirements and transparency into the location of government insured deposits.

    16. CommentedMark Pitts

      @ Polycapitalist: I have not read Prof. Johnson’s book – primarily because his articles on this website are so biased and non-scientific. If he can make factual arguments, he should include them in his articles – rather than just make accusations without adducing facts.

      Your points are well taken concerning Fannie, Freddie, AIG, and Bear. But these aren’t banks! If the banks did not create the problem, but only fell victim to the bankruptcies of other players, why are they to blame for the crisis? Fannie and Freddie will be by far the biggest failures, and they were both directly regulated by Congress. So, logically we have to ask, does government regulation of financial institutions increase or decrease risk?

      Too big to fail does pose a threat to taxpayers, although it is questionable how much it has cost taxpayers so far. However, “too small to matter” also poses an economic risk for the US economy. As the old days before interstate banking proved, small US banks cannot compete against giant foreign competitors. Also, keep in mind that many industries like the auto makers are also apparently too big to fail. Yet, no one is calling for additional government regulation of companies like GM that have been slowly failing for 30 years.

    17. CommentedMark Pitts

      My apologies to Mr. Johnson for any misuse of his given name in the earlier post.

    18. CommentedMark Pitts

      Professor Simon’s accusations against Professor Bollinger are laughable.

      Anyone who has who has read more than one of Prof. Simon’s articles on banks is well acquainted with his deep personal vendetta against those institutions and his lack of academic rigor whenever he discusses them. He consistently attacks banks with half-truths and innuendo, not facts.

      Consider the article at hand:

      How can Prof. Simon, of all people, complain about someone else’s nonacademic language? The negative terminology in this article is not found in any academic literature on finance or economics, and he offers absolutely no proof of his accusations. Does all this arise from his personal feelings against banks?

      Simon conveniently fails to mention that the JP Morgan loss has not cost taxpayers 1 cent, and is very unlikely to ever do so. In any case, the loss is just a tiny portion of their assets.

      Simon implies that banks’ political contributions are to further corruption. Yet, as usual, he offers no proof. Political contributions hardly prove corruption.

      Simon says that traders at banks routinely take large risks by which they profit if successful, but that taxpayers pay if they fail. Yet, only once in our lifetimes has anything remotely similar to this occurred at the banks.

      Simon conveniently forgets to mention that the bank bailouts were repaid in full with interest and the taxpayers made a great return on their investment. (And he forgets to mention the taxpayer losses associated with the auto & union bailout.)

      Simon adduces few facts and relies heavily on the work of Ferguson to support his case; yet he fails to demonstrate why we should believe Ferguson. Because his work won an academy award? If the approbation of Hollywood is sufficient criterion, then we know the world will end this December according to the Maya prophesy, so who cares about the banks?

      The author may hold academic credentials, but his emotional accusatory diatribes on Project Syndicate have never reflected as much.

        CommentedZlati Petrov

        How do you know the $2BN loss hasn't cost taxpayers a single cent? Maybe it hasn't cost us a single explicit cent, but are you sure it hasn't cost us a lot implicitly? What if the consequences (regulatory and behavioral) are costly?

        Where is the academic proof behind your statements, then?

        And if we have had to bail out banks only once in our lifetime, as you say, can you not argue that the expectation of precisely such a bail-out affected behavior every single day of our lifetimes?

        Maybe, maybe not. But your statements have no more (and no less) substance than the ones you accuse of lacking the same.

        CommentedThe PolyCapitalist


        It sounds like you are not familiar with Simon's extensive writing (e.g., book titled 13 Bankers) and work over the past several years on the problem of Too Big to Fail megabanks. He has convincingly argued and documented the taxpayer subsidies provided to the very largest financial institutions, such as JP Morgan, and the resultant problems.

        In terms of whether JP Morgan has cost taxpayers any money, do you really believe that JP Morgan would have avoided bankruptcy had the U.S. Government and Federal Reserve not bailed out Fannie, Freddie, AIG, Bear, etc.? Or how would JP Morgan be doing without ZIRP and what amounted to unlimited crisis lending from the Fed?

        JP Morgan may not directly be costing taxpayers any nominal money (yet), but only a very narrow and improper accounting view would lead someone to conclude that the existence of Too Big to Fail institutions like JP Morgan presents no economic costs and therefore pose zero risk to taxpayers.

        And if you're one of those who believe the myth that the U.S. bank bailouts were "profitable" for taxpayers then I would encourage you to read this:

        I also encourage you to ask the Spanish or Irish, which have had to backstop their banking systems with taxpayers funds, how much their banks have cost taxpayers.

    19. CommentedProcyon Mukherjee

      Ferguson’s section of the book, ‘Ivory Tower’, gives a glimpse of the other side of academia, steeped in the fastidious transition to wield the world of ‘high’ business interests, which are conflicting in nature to the ideals of academics, that is to take a view of the world without a bias for the profiteering, that could take the shine off rational thinking.

      It seems odd that learned men of letters are so overwhelmingly in public display in recent times declaring their views for and against any motion, specially the community of Economists, who have theory on both sides of the motion, while the world has moved from lull to lull.

      Democracy is one whole generation’s making of a dream, like a project that needs building brick by brick, the artifice of an engagement process that is not funded for a narrow cause; ‘pay to play’, as in the book, is a pale reminder of the strains of our times, that mimics the artistry that politicians and academicians display under the garb of ushering in a common good.

      Procyon Mukherjee