Money in the Morning

Wall Street pay on record pace — Compensation at the top publicly held investment and securities firms will be $144 billion in 2010, a 4 percent increase from last year's number, according to a Wall Street Journal survey. If the estimate holds, 2010 would be the second straight year of record pay, at a time when the economy is still hurting.

From the Journal story: "The pay numbers show that firms, benefiting from low interest rates and strong international markets, continue to base their pay on economic and market conditions rather than the level of pressure coming from regulators in Washington and overseas. ... There are some signs that pay might slow down in coming quarters. Tough new rules about how much capital banks must hold could force Wall Street to cut back on compensation in an effort to preserve returns on equity for shareholders, analysts say." http://goo.gl/TCfo

BUT... Felix Salmon cautions that the survey's numbers might not be accurate. In its story about record bonuses in 2009, the Journal didn't exclude compensation for the firms that failed during the financial crisis, giving a less than complete picture. Salmon isn't ready to let up until he sees the compensation survey's yet-to-be-explained methodology. http://goo.gl/iubo

HOUSING REFORM — The Obama administration is finally gearing up for an overhaul of the government-backed mortgage giants Fannie Mae and Freddie Mac. The Washington Post has a profile of Rep. Barney Frank (D-Mass.) as he readies to play a "pivotal role" in the reform push. The WaPo piece has small hint of when and what to expect: "In taking on their next major economic challenge, senior Obama officials are scheduled to release a proposal in January that would replace the two mortgage giants and rethink federal programs that help make housing affordable."

Also: Frank voices some regret about his role boosting Frannie in the past: "I was too late to see they were a problem. ... I did see them as an important source of rental housing. I did not foresee the extent to which bad decisions ... were causing problems." http://goo.gl/J694

ICYMI: FBR analysts said last week that the administration is looking at a broad overhaul of housing policies and would put more emphasis on renting instead of homeownership. http://goo.gl/leJl

The increased chatter about housing reform comes as Dems and the White House struggle with how to deal with the ongoing rash of foreclosures and the paperwork mess left by lenders.

NYT hed: "Foreclosure Tightrope for Dems" — "The swelling outcry over fast-and-loose foreclosures has thrust the Obama administration back into the uncomfortable position of sheltering the banking industry from the demands of an angry public. ... While senior Congressional Democrats join the calls for a national moratorium on foreclosures, the White House once again is arguing against punishing the industry, just as it did in 2009 amid the outcry over the unbreakable habit of paying large bonuses." http://goo.gl/jr9f

Jon Stewart also takes on foreclosure mess (via Business Insider). http://goo.gl/dXSd

ANOTHER YEAR, ANOTHER NOBEL POLITICAL DEBATE — President Obama uses the Nobel Prize for economics won by his stalled Fed nominee Peter Diamond to press Senate Republicans to stop blocking the nomination. Reuters: http://goo.gl/PmgE

But Sen. Richard Shelby (R-Ala.) isn't budging yet. His statement: ‘“While the Nobel Prize for Economics is a significant recognition, the Royal Swedish Academy of Sciences does not determine who is qualified to serve on the Board of Governors.”

Tyler Cowen on the breadth of Diamond’s work, which has had a major impact on understanding of the labor market, risk, utility, Social Security and host of other fields. http://goo.gl/VSoY

The work of the three Nobel-winning economists suggest there’s a structural reason for persistent unemployment. http://goo.gl/psMt

Ezra Klein says Republicans are holding up Diamond because they don’t like behavioral economics. http://goo.gl/dpaH

Possible downside to Fed stimulus — New Fed Vice Chairwoman Janet Yellen, seen as an “inflation dove” who backs more Fed action to boost the economy, acknowledged the risks of a loose monetary policy in a speech Monday. The odds are on the Fed to move ahead with quantitative easing at their November meeting. http://goo.gl/BozW

Kansas City Fed President Tom Hoenig, an inflation hawk, suggests raising interest rates is the way to go. http://goo.gl/SXRC

U.S. faces Friday decision on whether to get tough on the yuan. http://goo.gl/LF6d

Donald Marron hopes fiscal woes lead to global warming action, carbon tax. http://goo.gl/GDxw