August 4

What you need to know to navigate today’s economic debates.

Regulate Financial Pay to Reduce Risk-Taking (FT)
A bill requiring federal regulators to draw up rules for compensation structures in the financial sector passes House Friday and moves to Senate.

Does Executive Comp Cause Big Recessions? (EconUnbound)
A new academic paper makes a credible argument that stock option contracts for executives can cause excessively large swings in the economy.

6 Economists On Why Ron Paul’s Fed Audit Idea Is Wrong (Reuters)
James Pethokoukis asks, “How would a GAO audit really threaten Fed independence in practical terms?”.

FDIC’s Bair Opposes Single Regulator, Saying Plan ‘No Panacea’ (BLM)
Consolidating agencies would disrupt regulatory staffs and may overlook the needs of community banks that rely on state supervision, Bair said in testimony to Senate Banking Committee.

Geithner Vents at Regulators as Overhaul Stumbles (WSJ)
Geithner blasted top U.S. financial regulators last Friday as frustration grows over the Obama administration’s plan to overhaul U.S. financial regulation.

Fed Plans to Strengthen Bank Examinations With Teams of Experts (BLM)
A new team composed of experts in everything from law to economics and markets plans to strengthen the examinations of banks’ lending practices and financial health.

Bank Regulators Dig in Against Obama Shake-Up (Reuters)
Top U.S. bank regulators will speak out on Tuesday against some key elements of the Obama administration’s plan to reshape financial regulation.

Bank of America Settles S.E.C. Suit Over Merrill Deal (NYT)
Bank of America will pay $33 million to settle the S.E.C.’s claims, without admitting or denying the accusations.

Avoiding the Tail Wagging the Dog (Aleph)
David Merkel argues to separate investment and gambling through a requirement of hedging in synthetic transactions.

Dueling Public Interests In Policing Rescued Firms (WP)
Some troubled firms sued by SEC could wind up paying penalties with taxpayer money from the federal bailout.