Online Journal April, 2009

Apr
9
2009

Written by:
Will Pickering

Princeton Alums Defend AIG in Wake of Bonus Backlash

Following AIG's disclosure that it had paid out more than $165 million in bonuses, the public outcry became so severe that the company advised its employees against wearing AIG clothing and identification in public. Given that the insurance giant received over $170 billion in bailout money, indignation that the money was spent at least partly on undeserved bonuses is certainly justified. But media coverage of the controversy often failed to distinguish between those parts of AIG which contributed to the current financial meltdown and received unmerited bonuses, and the other divisions of the company which were innocent of wrongdoing. A number of Princeton alumni currently employed by AIG expressed just this point in a recent Daily Princetonian article:

Apr
3
2009

Written by:
Shuang Yang

Ivy League Cuts: What $50K in Tuition Buys

The Ivy League consists of not only some of the most competitive colleges in the United States, but also some of the wealthiest. At the same time, the price tag of an Ivy League education can be quite expensive, with the costs of tuition, room and board, etc. totaling almost $50,000. Yet, in these uncertain economic times, as their endowments shrink, even the Ivy League schools are cutting back on certain projects and initiatives. Take Princeton University, for instance:

Princeton: Fewer courses, building and renovations put on hold
  • 2008 Endowment: $16.3 billion
  • Change since June 30: down 11% through Oct. 31
Apr
3
2009

Written by:
Shuang Yang

The Wall Street Journal’s CEO 2008 Compensation Survey

In the midst of the economic downturn in the past year, executive compensation on the whole declined as expected. According to a survey conducted by the Hay Group, a Philadelphia management consultant company, the median salary and bonus of CEOs from 200 large U.S. companies was $2.24 million, down 8.5% from the previous year. Factoring in stock, stock options, and other long-term incentives, the median total compensation package was $7.6 million, down 3.4%. The list was headed by a surprising name:

The biggest pay package in The Wall Street Journal's CEO 2008 compensation survey went to an India-born engineer who was granted equity initially valued at $103.5 million for a job he doesn't fully have yet.

Motorola Inc. hired Sanjay Jha as its co-CEO last August, intending to have him run its ailing cellphone unit and take it public as a separate company. The spin-off plan is on hold because of the credit crunch and the deteriorating finances of the unit.

Apr
2
2009

Written by:
Jimmy Connolly

GreenNote

In this economic slowdown, colleges are hit just as hard as Wall Street. From June 2008 to January 2009, Yale's endowment fell 25% and Harvard estimates that its endowment may fall by 30% by the end of this June. Here at Princeton, administrators estimate that the drop will be around 30% for this coming June. When endowments fall, universities are stuck with a problem--how to deal with financial aid. In some cases, the students brunt much of the blow as financial aid provided by colleges does not rise to account for the financial hardships of students' families.
One place students can turn is a new startup called GreenNote, which looks to pair students with loans based on their activities and career goals. University of Pittsburgh student Caitlyn Christensen writes about GreenNote in The Pitt News--

A newly formed company has combined the powers of social networking, microfinance and the Internet with the ambition of making student loans efficient and attainable.

GreenNote, an exclusively online alternative loan company, now offers students another lending option for financing their educations.

Apr
2
2009

Written by:
Zach Liebmann

Old Theory for New Times

Few of us have heard of his name and even fewer know about his contribution to economics. But the economic theory of Hyman Minsky is making its triumphant return thanks to the current financial crisis.

A recent article in The Economist discusses Minsky's theory's that "the financial system played a big role in exaggerating the economic cycle, one that was understated by conventional theory."

The Economist writes:

"Minsky divided the process into three phases. In the first, investors take on little enough debt that they have no trouble meeting their capital and interest payments. In the second, they stretch their finances so they can only afford the interest. In the third, or Ponzi, phase they take on debt levels that require rising prices to be safely financed; the homebuyers who took on 125% mortgages at the peak of the property boom were a classic example."

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