I have said it before and I’ll say it again: All of this hand wringing over executive compensation seems to exist in a parallel world where corporate executives have no risk aversion, where there is no real competition for managerial talent, and where firms can only take on too much–never too little–risk.  And this in a day and age (the age of never-ending financial reform regulation, Lehman/Bear, enormous public scrutiny of financial and banking industries, etc.) when the downside from excessive risk-taking is now either a) extremely large or b) non-existent (but only because of guaranteed government bail-outs).  In either case, fiddling with compensation schemes will not help matters.

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There has been a lot of talk recently about the possibility that lax antitrust gave rise to the financial crisis or that antitrust could be used as a proactive weapon to prevent mergers and acquisitions that would create entities “too big to fail.” George Priest recently took AAG Varney to task for suggesting that there was a consensus amongst economists that lax antitrust contributed to the current financial situation.  Simon Johnson has been pushing the idea that antitrust is an appropriate tool for dealing with the type of financial risk imposed by businesses that become so large that their failure would cause substantial damage throughout the economy.  The idea might be catching on.  Frank Pasquale recently cited to Johnson’s work favorably.  The idea has also been favorably cited by Commissioner Rosch.

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Economic theory is essential to antitrust law.  It is economic analysis that constrains antitrust law and harnesses it so that it is used to protect consumers rather than competitors.  And the relationship between economics and antitrust is responsible for the successful evolution of antitrust from its economically incoherent origins to its present state.  In my view, which I’ve expressed in greater detail elsewhere, the fundamental challenge for antitrust is one that is created by having “too many theories” without methodological commitments from regulators and courts on how to select between them.  The proliferation of economic models that came along with the rise of Post-Chicago economics and integration of game theory into industrial organization has led to a state of affairs where a regulator or court has a broad spectrum of models to choose from when analyzing an antitrust issue.

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In his recent speech on the GM bankruptcy, President Obama reassured Americans that the government, which now holds 60% of GM’s stock, is not going to try to take over management of the company…

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If you haven’t been living under a rock recently, you’ve seen an incredible amount of hand wringing–and proposed regulation–around “excessive compensation.”  I’m a little too lazy to amass all the relevant links here, but both the administration and the congress are introducing regulations/bills and talking about the issue extensively.

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In the wake of Bork and Posner, and Baxter and the Reagan Revolution, a consensus emerged that big could be bad, but the harm that dominant firms could do needed to be demonstrated, not simply assumed in consequence of their sheer size. Moreover, the demonstration required harm to competition. The consensus held through the Clinton Administration, buoyed by the talented economists that it attracted. The Section 2 Report is controversial in drawing lines about where harm to competition begins, but it is not hard to imagine all sides of the debate agreeing with this from the report: “Competition is ill-served by insisting that firms pull their competitive punches so as to avoid the degree of marketplace success that gives them monopoly power or by demanding that winning firms, once they achieve such power, ‘lie down and play dead.’ ” (Report, p.8)

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Cnn.com tells us the good news that “Goldman reports $1.8 billion profit,” but the totality of the information in the cnn.com article strikes me as mildly curious.

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So says Lucian Bebchuk in the WSJ…

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A couple of weeks ago, Rep. Barney Frank sent a snippy letter to Northern Trust, a Chicago-based bank that caters to very wealthy clients. Mr. Frank and some other Platonic guardians on the House Financial Services Committee were incensed that Northern Trust, a recipient of TARP funds, had sponsored and hosted clients at a California golf tournament.

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