Bonuses and Barclays

It has not been a good couple of days for Barclays.

First, the BBC's Panorama programme alleged that the bank misled its shareholders about the huge capital investment it received during the midst of the 2008 financial crisis. Unlike other UK banks, Barclays did not take a taxpayer-funded capital injection. Instead, it obtained capital from the Abu Dhabi government. According to the Panorama programme, the sole reason Barclays went down this route was to preserve their bonus culture. You can read about this here and UK residents can watch the Panorama programme here.

Second, Barclays announced profits today of £246m for 2012, down from £5.88bn in 2011. It is also going to get rid of 3,700 jobs. However, despite reduced profitability and job losses, the bonus pool for employees in 2012 was a staggering £1.85bn!

Bitcoin Bubble?

According to Robert Shiller , speaking at Davos, Bitcoin is a perfect example of a bubble - story here . Shiller sees Bitcoin as a backwards step in the evolution of money. George Selgin , a free banker, takes an opposing view - click here . Although he doesn't believe that Bitcoin is money, he sees its development as a fascinating turn in the evolution of money. In particular, he lauds the fact that Bitcoin production is constrained and cannot be infinite. There is a short video below where Bitcoin explain how it works.

How Valuable Are Connections?

Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner's confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small ne...

Boom and Bust: A Global History of Financial Bubbles

Boom and Bust: A Global History of Financial Bubbles, co-authored with my colleague Will Quinn , is forthcoming in August. It is published by Cambridge University Press and is available for pre-order at Amazon , Barnes and Noble , Waterstones and Cambridge University Press .

Finance: Past, Present and Future

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