Bernanke Bangs Reform Drum

Fed Reserve Chairman Ben Bernanke beat the drum yet again yesterday for financial regulatory reform, reports the New York Times. After the Obama team finally managed to unify its message among the scores of regulators, economists, and central bankers that constitute its economic team, that team has taken to the streets to espouse the need for reform. Bernanke, at a Fed conference, told colleagues, “With the financial turmoil abating, now is the time for policy makers to take action to reduce the probability and severity of any future crises.” Or in other words, just because the front is quiet doesn’t mean the war is over.

The main reform in the plan is the idea that the Fed should have the power to wind down failed investment banks safely, the way the FDIC can swoop in to take over and sell failed savings banks. It’s a nice idea—one that would resolve the dilemma the government faces now, where bailing out banks—and thus rewarding risky behavior—was the only tool available during the recent crisis. Bernanke should be pushing the reform, by the way: The paper writes the “plan would expand the Fed’s powers over big financial institutions but reduce it over consumers,” giving him more and better regulatory powers. The Washington Post also covered Bernanke’s speech and noted his example of AIG as a firm whose unique position allowed it to avoid financial regulation, something the reforms are designed to prevent.

Amazon (AMZN), the dot com whose investors ages ago fretted over if, and when, it would ever be profitable, continues to impress. The Wall Street Journal reports, that in the dot-com boom, “Amazon was growing quickly but losing money. Now, Amazon's stock gains are fueled on solid revenue growth and profits. On Thursday, the company posted a profit of $199 million for the third quarter as sales surged 28% to $5.45 billion, surpassing the average analyst estimate on Thomson Reuters of $5.03 billion.” The stock, which then-analyst Henry Blodget once thought would hit $400 in the go-go days of the boom, is worth $700 today. Blodget, who was barred by the SEC from working in securities, wrote on his media Web site, according to the Journal, that he was “raising a glass,” to Jeff Bezos, Amazon’s founder and CEO.

The Galleon hedge-fund insider-trading investigation just keeps getting more interesting. Roomy Khan, a former Galleon employee, is written about by the Times today as having a decade-long history of passing information to the fund, from her days working for Intel. Apparently she passed disgraced Galleon CEO Raj Rajaratnam information about Google and other companies and was convicted of wire fraud in 2002. Thing is, Khan is a lead government witness in the case against Rajaratnam.

Lease prices are cheap; fuel costs, while not great, are low; and the competition is choking on expenses. Great time to start a discount airline! The cycle of cheap flights returns, this time with an international twist, reports the Times. Air Asia X is among those expending its network out the “backpacker routes” of Southeast Asia and Australia and into Europe and possibly even the United States. Meanwhile, Ryanair, which has long coveted a cheap London-New York route (once speculating on one-way prices as low as $10), is playing the waiting game. The numbers aren’t quite right, says a representative: “We had expected the bottom to fall out of the market for long-haul aircraft, but so far that hasn’t happened.”

Finally, Smart Choices, a packaging label purporting to tell consumers when they were picking healthy foods, that in reality was supported by the food industry and often applied to products like sugary cereal, is shrinking. PepsiCo (PEP) and Kellogg’s (K), under pressure from the government, reports the Times, are removing the label from their products. The label, which, let’s face it, was designed to try to undercut the need for a federal label, which would likely have far stricter standards, is not going away altogether, though. Kraft Foods (KFT) has, “no plans to remove the logo from packaging.”