Category: Finance

Monarchy and Banking Don’t Mix

JACOB SOLL, professor of history, USC Dornsife.

This op-ed originally appeared in the Boston Globe on June 8.

As Pope Francis sets the course for his young papacy, one of his first challenges has nothing to do with theology or the behavior of the far-flung priests and bishops he supervises: It is to reform the troubled Vatican Bank. A private and highly secretive institution estimated to control more than $7 billion in capital and more than 33,000 secret accounts, the Institute for the Works of Religion (its official name) has long been dogged by scandals and questions.

Founded in 1942 to “safeguard and administer” the funds of church members, it has become a modern symbol of the hazards of secrecy in finance. It was accused of holding Croatian Nazi funds during World War II and more recently has faced continued suspicions of money laundering for the mafia.

Zuckerberg’s Tax Burden: $2 Billion and Done

EDWARD J. McCAFFERY, professor of law, Gould School of Law.

This op-ed originally appeared at CNN on April 9.

So, you think you have it bad this tax season. Have you heard that Facebook founder Mark Zuckerberg will pay between $1 billion and $2 billion in taxes? That sounds like a tough pill for anyone to swallow.

But it is premature to start a pity party for Zuckerberg. The twenty-something billionaire reaped large financial gains from exercising the stock options that triggered his tax bill, and he has benefited from favorable tax rules along the way. Even better, Zuckerberg will survive his encounter with the tax man in a position to never have to pay taxes again for the rest of his life.

Deconstructing the Sandy Relief Numbers

LARRY HARRIS, professor of finance, USC’s Marshall School of Business.

This op-ed originally appeared in the Wall Street Journal on Jan. 11.

President Obama asked Congress for $61 billion for various relief programs following Hurricane Sandy. The Senate approved the full request late last month, but so far the House has approved just $9.7 billion, for flood-insurance claims. The House will soon vote on the remaining $51 billion in proposed aid.

Sandy was an unusually large storm that did substantial damage to the Eastern Seaboard. More than eight million people lost power and perhaps as many as 100,000 were left homeless. Thousands of buildings were destroyed or damaged along the coastline from Maryland to Maine.

Many people don’t appreciate how large these numbers are, in particular the size of the proposed relief. Consider some simple comparisons. The $61 billion aid package represents:

How to Escape the Debt Ceiling Limit

EDWARD KLEINBARD, professor of law, USC’s Gould School of Law.

This op-ed originally appeared in the New York Times on Jan. 10.

The fiscal cliff may have been avoided, but an even higher-stakes political standoff — this time, over the federal debt ceiling — is just around the bend.

Congressional Republicans have said they will demand immense cuts to popular government programs in exchange for agreeing to raise the nation’s authorized borrowing limit of $16.4 trillion. The Treasury Department briefly nudged against that ceiling on Dec. 31, but used “extraordinary” financial measures to buy more time. If nothing is done, the government will soon be unable to pay all of its bills in a timely manner. This unprecedented event would profoundly damage the government’s credit rating and send the financial system into a tailspin.

China Needs a Wall Street

HASHEM PESARAN, professor of economics, USC Dornsife.

This op-ed originally appeared in The Sunday Times.

The British economy is experiencing a double-dip recession, the leading eurozone economies and Japan are stagnant and the American economy is slowing down. At the same time, emerging economies such as China and India continue to show impressive growth.

This divide in the fortunes of the industrialised and emerging economies is not new. Over the past two decades China’s importance has increased dramatically. While world trade has grown by about 40% from the mid-1990s, China’s trade has more than doubled during the same period.