The Baseline ScenarioWhat happened to the global economy and what we can do about itSkip to contentHomeAboutFinancial Crisis for BeginnersDownload in PDFComment GuidelinesTech Support← Older postsWant More?Posted on June 7, 2010 by James Kwak | Comments OffBlog feed: email — RSS — FacebookBooks: 13 Bankers — White House BurningSimon: Twitter — Economix — Project Syndicate — research papersJames: Twitter — The Atlantic — publicationsComments OffPosted in CommentaryWhat Is Citigroup Hiding From Its Shareholders Now?Posted on February 11, 2015 by Simon Johnson | 4 commentsBy Simon JohnsonIn the early and mid-2000s, Citigroup had compensation practices that can fairly be described as a disaster for shareholders (and for the broader economy). Top executives, such as then-CEO Chuck Prince, received big bonuses and generous stock options. Lower level managers and traders were paid along similar lines. These incentives encouraged Citi employees to take risks and boost profits. Unfortunately for shareholders, the profits proved largely illusory – when the dangers around housing and derivatives materialized fully, the consequences almost destroyed the firm.The market value of Citigroup’s stock dropped from $277 billion in late 2006 to under $6 billion in early 2009. The shareholders could easily have been wiped out – they were saved from oblivion by a generous series of bailouts provided by the federal government (see Figure 7 in the final report of the Congressional Oversight Panel; direct TARP assistance was $50 billion but “total federal exposure” was close to $500 billion). In the next credit cycle, the experience for Citi shareholders could be even worse. So it is entirely reasonable for shareholders to look carefully at, among other things, the details of how executives and other key employees are paid – and to understand the current incentives for taking and managing risk.But Citigroup is resisting efforts to disclose fully the structure of relevant compensation contracts. What is Citigroup hiding now? Continue reading →4 CommentsPosted in CommentaryTagged citigroupTax Breaks (for the Rich) Are ForeverPosted on January 29, 2015 by James Kwak | 12 commentsBy James KwakThis week I returned to one of my favorite topics: raising taxes, particularly on the rich. First I wrote an article for Medium about the single most obvious change that should be made to the tax code: eliminating the step-up in basis at death for capital gains taxes. If you’re not sure what step-up in basis means, or why it’s a ridiculous idea, you should read the article.Then today I wrote an article for the Atlantic about why (a) killing 529 plans was a great idea in President Obama’s latest tax proposals and (b) why 529 plans are impossible to kill. Here’s the crux of the matter:“If you’re poor, a 529 plan gives you nothing, since you don’t pay income taxes; the American Opportunity Tax Credit gives you $4,000 ($5,000 under Obama’s proposal) b