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	Gordon Gekko Reborn by Matt Taibbi, Nouriel Roubini Rolling Stone & agencies   How to combat Wall Street corruption, by Matt Taibbi. (Rolling Stone)   How to combat Wall Street corruption has consumed my life for years now, and it''s hard for me not to see where Occupy Wall Street could be better. With tens of millions entering the ranks of the hungry thanks to artificially inflated commodity prices, and millions more displaced from their homes by corruption in the mortgage markets, the headline from the first weeks of protests against the financial-services sector was an old cop macing a quartet of college girls.   That, to me, speaks volumes about the primary challenge of opposing the many headed hydra of Wall Street corruption, which is that it''s extremely difficult to explain the crimes of the modern financial elite in a simple visual. The essence of this particular sort of oligarchic power is its complexity and day-to-day invisibility:   Its worst crimes, from bribery and insider trading and market manipulation, to backroom dominance of government and the usurping of the regulatory structure from within, simply can''t be seen by the public or put on TV. There just isn''t going to be an iconic photo with Goldman Sachs, Citigroup or Bank of America – just 62 million Americans with zero or negative net worth, scratching their heads and wondering where the hell all their money went and why their votes seem to count less and less each and every year.   The Occupy movement is going to have to offer concrete solutions to the problems posed by Wall Street. To do that, it will need a short but powerful list of demands. There are thousands one could make, but I''d suggest focusing on five:   1. Break up the monopolies. The so-called "Too Big to Fail" financial companies – now sometimes called by the more accurate term "Systemically Dangerous Institutions" – are a direct threat to national security. They are above the law and above market consequence, making them more dangerous and unaccountable than a thousand mafias combined. There are about 20 such firms in America, and they need to be dismantled; a good start would be to repeal the Gramm-Leach-Bliley Act and mandate the separation of insurance companies, investment banks and commercial banks.   2. Pay for your own bailouts. A tax of 0.1 percent on all trades of stocks and bonds and a 0.01 percent tax on all trades of derivatives would generate enough revenue to pay us back for the bailouts, and still have plenty left over to fight the deficits the banks claim to be so worried about. It would also deter the endless chase for instant profits through computerized insider-trading schemes like High Frequency Trading, and force Wall Street to go back to the job it''s supposed to be doing, i.e., making sober investments in job-creating businesses and watching them grow.   3. No public money for private lobbying. A company that receives a public bailout should not be allowed to use the taxpayer''s own money to lobby against him. You can either suck on the public teat or influence the next presidential race, but you can''t do both. Butt out for once and let the people choose the next president and Congress.   4. Tax hedge-fund gamblers. For starters, we need an immediate repeal of the preposterous and indefensible carried-interest tax break, which allows hedge-fund titans like Stevie Cohen and John Paulson to pay taxes of only 15 percent on their billions in gambling income, while ordinary Americans pay twice that for teaching kids and putting out fires. I defy any politician to stand up and defend that loophole during an election year.   5. Change the way bankers get paid. We need new laws preventing Wall Street executives from getting bonuses upfront for deals that might blow up in all of our faces later. It should be: You make a deal today, you get company stock you can redeem two or three years from now. That forces everyone to be invested in his own company''s long-term health – no more Joe Cassanos pocketing multimillion-dollar bonuses for destroying the AIGs of the world.   To quote the immortal political philosopher Matt Damon from Rounders, "The key to No Limit poker is to put a man to a decision for all his chips." The only reason the Lloyd Blankfeins and Jamie Dimons of the world survive is that they''re never forced, by the media or anyone else, to put all their cards on the table. If Occupy movement can do that – if it can speak to the millions of people the banks have driven into foreclosure and joblessness – it has a chance to build a serious grassroots movement. All it has to do is light a match in the right place, and the overwhelming public support for real reform – not later, but right now – will be there in an instant.   Gordon Gekko Reborn, by Nouriel Roubini.   In the 1987 film Wall Street, the character Gordon Gekko famously declared, “Greed is good.” His creed became the ethos of a decade of corporate and financial-sector excesses that ended in the late 1980’s collapse of the junk-bond market and the Savings & Loan crisis. Gekko himself was packed off to prison.   A generation later, the sequel to Wall Street – to be released next month – sees Gekko released from jail and returned to the financial world. His reappearance comes just as the credit bubble fueled by the sub-prime mortgage boom is about to burst, triggering the worst financial and economic crisis since the Great Depression.   The “Greed is good” mentality is a regular feature of financial crises. But were the traders and bankers of the sub-prime saga more greedy, arrogant, and immoral than the Gekkos of the 1980’s? Not really, because greed and amorality in financial markets have been common throughout the ages.   Teaching morality and values in business schools will not tame such behavior, but changing the incentives that reward short-term profits and lead bankers and traders to take excessive risks will. The bankers and traders of the latest crisis responded rationally to compensation and bonus schemes that allowed them to assume a lot of leverage and ensured large bonuses, but that were almost guaranteed to bankrupt a large number of financial institutions in the end.   To avoid such excesses, it is not enough to rely on better regulation and supervision, for three reasons: Smart and greedy bankers and traders will always find ways to circumvent new rules. CEOs and boards of directors of financial firms – let alone regulators and supervisors – cannot effectively monitor the risks and behaviors of thousands of separate profit and loss centers in a firm, as each trader and banker is a separate P&L with its own capital at risk. CEOs and boards are themselves subject to major conflicts of interest, because they don’t represent the true interest of their firms’ ultimate shareholders.   As a result, any reform of regulation and supervision will fail to control bubbles and excesses unless several other fundamental aspects of the financial system are changed.   First, compensation schemes must be radically altered through regulation, as banks will not do it themselves for fear of losing talented people to competitors. In particular, bonuses based on medium-term results of risky trades and investments must supplant bonuses based on short-term outcomes.   Second, repeal of the Glass-Steagall Act, which separated commercial and investment banking, was a mistake. The old model of private partnerships – in which partners had an incentive to monitor each other to avoid reckless investments – gave way to one of public companies aggressively competing with each other and with commercial banks to achieve ever-rising profitability, which was achievable only with reckless levels of leverage.   Similarly, the move from a lending model of “originate and hold” to one of “originate and distribute” based on securitization led to a massive transfer of risk. No player but the last in the securitization chain was exposed to the ultimate credit risk; the rest simply raked in high fees and commissions.   Third, financial markets and financial firms have become a nexus of conflicts of interest that must be unwound. These conflicts are inbuilt, because firms that engage in commercial banking, investment banking, proprietary trading, market making and dealing, insurance, asset management, private equity, hedge-fund activities, and other services are on every side of every deal (the recent case of Goldman Sachs was just the tip of the iceberg).   There are also massive agency problems in the financial system, because principals (such as shareholders) cannot properly monitor the actions of agents (CEOs, managers, traders, bankers) that pursue their own interest. Moreover, the problem is not just that long-term shareholders are shafted by greedy short-term agents; even the shareholders have agency problems. If financial institutions do not have enough capital, and shareholders don’t have enough of their own skin in the game, they will push CEOs and bankers to take on too much leverage and risks, because their own net worth is not at stake.   At the same time, there is a double agency problem, as the ultimate shareholders – individual shareholders – don’t directly control boards and CEOs. These shareholders are represented by institutional investors (pension funds, etc.) whose interests, agendas, and cozy relationships often align them more closely with firms’ CEOs and managers. Thus, repeated financial crises are also the result of a failed system of corporate governance.   Fourth, greed cannot be controlled by any appeal to morality and values. Greed has to be controlled by fear of loss, which derives from knowledge that the reckless institutions and agents will not be bailed out. The systematic bailouts of the latest crisis – however necessary to avoid a global meltdown – worsened this moral-hazard problem. Not only were “too big to fail” financial institutions bailed out, but the distortion has become worse as these institutions have become – via financial-sector consolidation – even bigger. If an institution is too big to fail, it is too big and should be broken up.   Unless we make these radical reforms, new Gordon Gekkos – and Charles Ponzis – will emerge. For each chastised and born-again Gekko – as the Gekko in the new Wall Street is – hundreds of meaner and greedier ones will be born.   * Nouriel Roubini is Professor of Economics at the Stern School of Business, New York University.
	Manage food better - Too many people still go hungry by IRIN News UN Office for the Coordination of Humanitarian Affairs   A new global architecture to govern food security is urgently needed to reduce the number of hungry people, and predict and prevent another food price crisis like the one that took the world by surprise in 2006-08.   Shenggen Fen, director general of the International Food Policy Research Institute (IFPRI), a US-based think-tank, urged leaders of the G8 industrialised countries and G20 emerging countries, to place greater focus on the issue.   "The existing governing systems, and even countries, failed to predict the [food price] crisis in 2007/08," and ever more people have been going hungry since then, he told IRIN.   The food price crisis and the recession that followed pushed the number of malnourished men, women and children to more than one billion in 2009, according to UN agencies, and the figure is still growing.   "Hunger has been much more pervasive than poverty ... If past trends continue, global food security will deteriorate even further," warned an IFPRI report on meeting the UN Millennium Development Goal to halve hunger, called Business As Unusual, written by Fen and released on 23 June.   "While food prices have dropped somewhat , incomes because of the recession have been reduced by a much higher rate," said Holger Matthey, an economist at the UN Food and Agriculture Organization (FAO).   The G8 countries pledged US$22 million to tackle global hunger at their 2009 meeting in L"Aquila, Italy, "But we don"t know how much of that money has come through," said Fen, who proposed setting up a tracking system to monitor funds for reducing hunger.. Visit the related web page
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