U.S. Rep. Spencer Bachus, the top Republican on the House Financial Services Committee, said Friday that major parts of the Obama administration’s effort to revamp bank regulation “have stalled” as he slammed efforts by Democrats to push through legislation that could impact executive compensation.

Rep. Spencer Bachus. (Getty Images)

“To create the illusion of progress on regulatory reform, the Democrats have hastily approved legislation today that gives unprecedented authority to unelected Washington bureaucrats to decide the pay of every American at every financial institution,” the Alabama Republican said in a press release. “This government micromanagement of daily business affairs of companies is the wrong answer to address the causes of the financial crisis.”

Lawmakers are expected to consider other parts of the plan to overhaul regulatory rules after the August recess.

Economists aren’t the only ones scrambling to predict what the world will look like after the recession. Political pundits are also squinting too see into the future — their question: Will the global economic meltdown change the game in international politics?

The recession may be having a smaller impact on geopolitics than some predicted. (Getty Images)

“Not much,” says a new RAND Corp. study. The U.S. will continue to be the world’s superpower and policeman, capitalism the most popular economic recipe, and, as the rhetorical squabbles born in the heat of the crisis quiet down, old friends will stay friends and foes remain foes, argued Robert D. Blackwill.

Blackwill, a former U.S. ambassador to India and presidential envoy to Iraq under the Bush administration, dismissed what he called “a flood of recent articles” predicting the recession’s “destructive consequences for the international system.” If the economy recovers by the first half of 2010, as most analysts predict, wrote Blackwill, the face of international politics isn’t likely to change in any fundamental way in the next five years.

The report politely contradicts the Cassandras who have been warning about the international political fallout of the global economic slump, among them Director of National Intelligence Dennis Blair, who in February called the economic crisis “the primary near-term security concern of the United States” during testimony before the Senate Select Committee on Intelligence.

Sure, wrote Blackwill, the plunging world economy has already created its fare share of political trouble, with government crises in Iceland, Latvia, the Czech Republic, Hungary and Estonia, and street protests erupting in countries ranging from Greece to Russia. And more trouble may come in the near future, he noted, in the form of “more poverty, more disease, more crime, more migration, and more Third World military conflict.”

But, maintained the author, the economic crisis doesn’t seem to be moving the fundamental pieces of the international political puzzle. Popular discontent over the recession didn’t send Mexico teetering on the verge of anarchy and it didn’t trip Pakistan into loosing control of its nuclear weapons or starting another war with India, as some feared. In Iran, the closest approximation to a revolution the country has seen since 1979 was a result of election fraud, not falling oil prices amidst a global slump in demand.

The downturn, argued Blackwill, just isn’t enough to destabilize a Chinese Communist Party that survived self-made economic disasters of the size of the Great Leap Forward and the Cultural Revolution. And a staggering pile of public debt doesn’t seem to be pushing the U.S. to cut on its foreign policy agenda and commitments.

Blackwill’s paper is a sobering response to many of the doomsday scenarios circulating a few months ago, though predicting a rosier future must be easier now that talk is all about green shoots and China, for example, is back to 8% growth in the second quarter.

There was some hope of a recovery in certain U.S. housing markets this week. But the situation in many of Florida’s hardest-hit markets still remains rather hopeless.

A new report from LPS Applied Analytics shows that Florida was home to 19 of the top 20 housing markets with the most foreclosure inventory in June. Florida took the top 18 spots, with Cape Coral-Fort Myers, Miami, and Clewiston leading the list. Only Merced, Calif., at No. 19, kept Florida from owning the top 20.

Florida’s inventory problem was worse than other hard-hit markets in California, but housing anaylsts also note that it’s inventory problem has been weighed down by laws that require courts to process foreclosures, which slows down the foreclosure process.

Meanwhile, the oversupply of condos is so severe in Fort Myers that one family remains the sole occupants of a 32-story luxury condo tower in the city’s downtown. The News-Press of Fort Myers offered this gem when it profiled Victor Vangelakos, who with his wife and three kids are the only residents in the Oasis I condo.

The News-Press writes that the 45-year-old Weehawken, N.J., firefighter bought the condo from Miami-based The Related Group for $430,000 in November, and had planned to use it as a second-home until retiring there in a few years. Sales were so poor in the Oasis I that Related tried to move most of the buyers into the adjacent Oasis II, but Mr. Vangelakos’s lender wouldn’t agree to the swap.

It seems that there’s always an odd-man out like this during a building boom. In a story on San Diego’s condo bust, the Los Angeles Times reminded readers about Michael Berg, who was the only resident of San Diego’s41-story twin-tower One Harbor Drive condo complex from 1993 to 1995.

Mr. Berg became a “local legend,” the Times writes, after the local paper ran a front-page feature on the lawyer, who said that he sometimes took the trash out in the nude because he had no neighbors.

This week we learned that the administration of New York City’s mayor Michael Bloomberg pays to fly homeless families one-way out of the city, and that the housing slump might be “easing.” Here’s what was happening at the higher recesses of the market:

Karl Rove lists his Federal-style home in Washington, D.C., for $1.585 million in order to relocate to Texas. Built in 1968, the 4,529-square-foot house has five bedrooms and four-and-a-half bathrooms. Mr. Rove bought it in 2001 for $799,000. (Zillow)

Dr. Conrad Murray, Michael Jackson’s personal physician, could face foreclosure on the Las Vegas home that authorities searched in a manslaughter investigation about the pop star’s death. Dr. Murray made his last $15,000 payment on the property in January, and he has since accrued more than $100,000 in debt plus penalties. (USA Today)

Celebrity Nascar driver Jimmie Johnson lists his condominium in New York’s Chelsea neighborhood for $4.4 million. Mr. Johnson paid $3.98 million for the 3,200-square-foot loft in 2007. Located in a doorman building with a private gym, the home has three beerooms and three-and-a-half bathrooms. Mr. Johnson and his wife, Chandra, have a primary residence near Charlotte, N.C. More photos (WSJ)

Actress Melissa Joan Hart sells her Los Angeles home for nearly $2.5 million. The Spanish-style house in the city’s Sherman Oaks area measures 4,911 square feet and has five bedrooms and five bathrooms. Ms. Hart put the home on the market for $3.25 million in October and later reduced the price to $2.85 million (Los Angeles Times)

DreamWorks producer David Lipman lists his home in Los Angeles’s Hollywood Hills for $2.195 million. Designed by architect Merle Roussellot and built in 1961, Mr. Lipman bought the classic midcentury house in 2000 for $678,000 and renovated it. It has two bedrooms and two bathrooms, as well as a koi pond and a pool. (Los Angeles Times)

Bruce Livingstone, the founder of stock-photography provider iStockphoto, pays $2.5 million for a landmark midcentury Los Angeles home. Located on a slope in the Los Feliz community, the home was built in 1966 for Dr. George Jacobson, a professor of medicine at the University of Southern California, and his wife Miriam. The two-story home measures 3,000 square feet and has walls of glass and brick, an atrium, a pool and city views. Mr. Livingstone bought the home in all-cash deal, including much of the artwork and furnishings. Photos (WSJ)

Tom Beasley, a Nashville lawyer who co-founded Corrections Corp. of America in 1983, lists a 2,100-acre ranch in Tennessee for $10 million. The property includes a 5,500-square-foot house that is linked by a breezeway to a three-bedroom guest apartment. It also has two barns and 15 spring- and river-fed ponds. Click here to see photos of the property. (WSJ)

James L. Ferraro, a Miami trial lawyer who owns the Cleveland Gladiators arena football team, buys a Manhattan penthouse in the Park Imperial  for $8.175 million. Mr. Ferraro also has a home in Miami, as well as a 14-bedroom home on Martha’s Vineyard. (New York Observer)

Roberta Campbell, the ex-wife of software giant Intuit’s chairman of the board William Campbell, buys a four-bedroom apartment in Manhattan for $17.5 million. The seller, Paula Lascano, paid $14.2 million for the 3,840-square-foot home in March 2008. The apartment first hit the market in April 2008 lsited at $22.95 million. The price was cut five times, bottoming out at $18.5 million in March 2009. (The Real Deal)

There are some changes in the pipeline for one of the economic blogs that the Journal listed in its top 30.

Len Burman, director of the Tax Policy Center and contributor to the nonpartisan group’s TaxVox blog, is leaving the Urban Institute in Washington for the Maxwell School of Syracuse University.

Burman wasn’t the only contributor to TaxVox, and the blog will continue to provide content with contributions from the Tax Policy Center’s staffers. But Burman’s indispensable analysis will be missed. Perhaps readers can encourage him to start his own blog from the halls of academia.

For an example of his work, check out today’s post on taxing health-care plans.

Beware of politicians and economists who credit fiscal stimulus for slowing the pace of recession in the second quarter.

As has already been widely reported, gross domestic product shrank at a much slower pace in the first quarter — 1% — than in the two previous quarters. It is true that government spending grew at a 5.6% annual rate for the quarter, moderating the contraction in gross domestic product.

But most of that increase came from the defense sector, not the nondefense sectors targeted by the American Recovery and Reinvestment Act. Defense spending grew at a 13.3% annual rate, in part a rebound from a 4.3 first quarter contraction. Nondefense spending grew at a 6% annual rate, contributing 0.15 percentage points to overall growth. The economy can use all of the help it can get, but it’s too soon to declare that federal spending is effectively making its way into the system.

This week we learned that the administration of New York City’s mayor Michael Bloomberg pays to fly homeless families one-way out of the city, and that the housing slump might be “easing.” Here’s what was happening at the higher recesses of the market:

Karl Rove lists his Federal-style home in Washington, D.C., for $1.585 million in order to relocate to Texas. Built in 1968, the 4,529-square-foot house has five bedrooms and four-and-a-half bathrooms. Mr. Rove bought it in 2001 for $799,000. (Zillow)

Dr. Conrad Murray, Michael Jackson’s personal physician, could face foreclosure on the Las Vegas home that authorities searched in a manslaughter investigation about the pop star’s death. Dr. Murray made his last $15,000 payment on the property in January, and he has since accrued more than $100,000 in debt plus penalties. (USA Today)

Celebrity Nascar driver Jimmie Johnson lists his condominium in New York’s Chelsea neighborhood for $4.4 million. Mr. Johnson paid $3.98 million for the 3,200-square-foot loft in 2007. Located in a doorman building with a private gym, the home has three beerooms and three-and-a-half bathrooms. Mr. Johnson and his wife, Chandra, have a primary residence near Charlotte, N.C. More photos (WSJ)

Actress Melissa Joan Hart sells her Los Angeles home for nearly $2.5 million. The Spanish-style house in the city’s Sherman Oaks area measures 4,911 square feet and has five bedrooms and five bathrooms. Ms. Hart put the home on the market for $3.25 million in October and later reduced the price to $2.85 million (Los Angeles Times)

DreamWorks producer David Lipman lists his home in Los Angeles’s Hollywood Hills for $2.195 million. Designed by architect Merle Roussellot and built in 1961, Mr. Lipman bought the classic midcentury house in 2000 for $678,000 and renovated it. It has two bedrooms and two bathrooms, as well as a koi pond and a pool. (Los Angeles Times)

Bruce Livingstone, the founder of stock-photography provider iStockphoto, pays $2.5 million for a landmark midcentury Los Angeles home. Located on a slope in the Los Feliz community, the home was built in 1966 for Dr. George Jacobson, a professor of medicine at the University of Southern California, and his wife Miriam. The two-story home measures 3,000 square feet and has walls of glass and brick, an atrium, a pool and city views. Mr. Livingstone bought the home in all-cash deal, including much of the artwork and furnishings. Photos (WSJ)

Tom Beasley, a Nashville lawyer who co-founded Corrections Corp. of America in 1983, lists a 2,100-acre ranch in Tennessee for $10 million. The property includes a 5,500-square-foot house that is linked by a breezeway to a three-bedroom guest apartment. It also has two barns and 15 spring- and river-fed ponds. Click here to see photos of the property. (WSJ)

James L. Ferraro, a Miami trial lawyer who owns the Cleveland Gladiators arena football team, buys a Manhattan penthouse in the Park Imperial  for $8.175 million. Mr. Ferraro also has a home in Miami, as well as a 14-bedroom home on Martha’s Vineyard. (New York Observer)

Roberta Campbell, the ex-wife of software giant Intuit’s chairman of the board William Campbell, buys a four-bedroom apartment in Manhattan for $17.5 million. The seller, Paula Lascano, paid $14.2 million for the 3,840-square-foot home in March 2008. The apartment first hit the market in April 2008 lsited at $22.95 million. The price was cut five times, bottoming out at $18.5 million in March 2009. (The Real Deal)

The latest recession, it turns out, is even worse than previously reported. And the 2001 downturn that plagued the job market for years? It now barely registers as a sustained contraction in economic output.

Alongside the second-quarter report on gross domestic product, the Commerce Department’s Bureau of Economic Analysis today released revised estimates of economic data going back to 1929. The BEA’s comprehensive revision to its National Income and Product Accounts shows an average annual growth rate of 3.4%, 0.1 percentage point higher than previously published estimates. From 1997 to 2008, the economy is shown growing at a 2.8% rate, also 0.1 percentage point above its earlier figure.

The update could make the current recession a challenger to the late-1950s downturn as the worst (in GDP terms) since the Great Depression. (Of course, the 2009 data could be revised next summer so you can’t say for sure.) The BEA now says inflation-adjusted GDP increased just 0.4% in 2008. Earlier estimates had put the growth at 1.1%. GDP is now shown dropping in last year’s first quarter (reported earlier as a gain), posting a smaller gain in the second quarter than shown earlier, a larger drop in the third quarter and a slightly-less-large tumble in the fourth quarter. From the fourth quarter of 2007 to fourth quarter of 2008, real GDP is shown dropping at a 1.9% annual rate compared with the earlier estimate of 0.8%.

The first quarter of 2009, which last month had been estimated as declining at a 5.5% annual rate, now shows an even worse 6.4% decline due to the benchmark revisions. That matches the first-quarter 1982 decline, but is still slightly better than the 7.9% drop in the second quarter of 1980.

The government’s comprehensive revisions are carried out every five years to update the NIPA accounts with new data from government agencies (such as the Census Bureau and IRS) and outside sources. This year, as we told you earlier, the BEA is changing some of its definitions and moving items around on the NIPA tables

The 2001 recession registers as even less of a contraction when measured over the full course of the downturn. From the fourth quarter of 2000 to the third quarter of 2001, real GDP increased by 0.1% under the revised figures due to a smaller contraction in investment spending. The earlier estimate showed it dropping 0.2%. Both are essentially flat, but the new figures should renew debate about the conventional GDP measure of a recession (versus the broader look at other data by the National Bureau of Economic Research). The first quarter of 2001 declined at a 1.3% annual rate, followed by a 2.6% gain in the second quarter, a 1.1% decline in the third quarter and a 1.4% gain in the fourth quarter.

The BEA says earlier business cycles show little revision.

Lucian Bebchuk and Alma Cohen, professor of law, economics, and finance and visiting professor of law and economics at Harvard Law School, respectively, write that postcrisis executive compensation policies appear even more lucrative than prior to the meltdown.

New York State Attorney General Andrew Cuomo released yesterday a report on compensation and income at nine major banks during 2003-2009. An assessment of these figures raises serious concerns from the perspective of both investors and taxpayers.

The Cuomo report focuses on nine large financial institutions that received substantial TARP support from the government. Below we focus on the compensation decisions these firms made during the first half of 2009. Assuming that these decisions are a sign of things to come, the firms’ post-crisis pay policies appear to be, in the aggregate, even more lucrative to the firms’ employees than precrisis policies.

From shareholders’ perspective, it is useful to examine what may be labeled “Earnings before Compensation (“EBC”), which are equal to the sum of net income and compensation expenses. A financial firm’s ECB in any given year represents the total pie to be divided between the two groups crucial for the firm’s existence and operations — the firm’s employees and the shareholders providing the firm’s capital. Firms’ compensation decisions determine what fraction of ECB goes to employees rather than left in firms’ coffers (or distributed as dividends) to shareholders.

During the first half of 2009, with the exception of State Street, the banks in the group have enjoyed substantial ECB levels. The bar graph below displays the fraction of the banks’ aggregate EBC levels paid out as compensation to employees during the precrisis years as well as during the first half of 2009.

As the bar graph shows, during each of the years 2003-2006, this fraction was in the 52%-62% range. In contrast, during the first half of 2009, this fraction was about 74%. To the extent that employees were not under-compensated during 2003-2006, investors have a reason to wonder: might financial firms be letting employees eat part of the investors’ lunch?

Defenders of firms’ compensation decisions argue that firms are paying what is necessary to retain able employees and to prevent the flight of talent. The aggregate figures of pay and compensation can also be useful in considering this argument.

In 2006, aggregate ECB for the banks in the group equaled (in 2009 dollars) $244 billion and the banks’ total compensation expenses were $143 billion. By contrast, assuming that ECB and compensation in the second half of 2009 will be the same as in the first half, the firms will pay an aggregate $156 billion even though they will generate an aggregate EBC of only $211. Assuming that the behavior of these firms is representative of the financial sector, investors might wonder why financial firms need in the aggregate to spend more on compensation even though they generate less value.

We now turn from the perspective of investors to that of the government (two perspectives that somewhat overlap as the government owns shares in some of these banks). We believe that government policy toward compensation in banks should focus on the incentives produced by pay structures, not on compensation amounts. But the above compensation figures should be of interest to public officials for two reasons.

First, during the financial crisis, taxpayers have expended substantial resources to shore up the firms’ capital, with the firms covered by the report receiving a total of $165 billions in TARP funding. The compensation amounts taken by employees out of the firms — $156 billion in 2009 alone assuming the second half of the year is the same as the first — are sufficiently large to have a meaningful impact on the firms’ capital.

Second, during the past two decades, compensation in finance has increased relative to other parts of the economy, and the financial sector has attracted an ever-increasing share of the country’s best and brightest. Following the financial crisis, there is widespread recognition that, in the post-crisis world, finance should command a smaller share of these best and brightest. To the extent that relative pay in the financial sector remains at or above its lofty precrisis levels, the desirable adjustment in the allocation of talent will be impeded or delayed.

Assessing the compensation figures for the first half of 2009 indicates that the good days of compensation are clearly rolling again. Investors and taxpayers should closely watch how these figures evolve during the remainder of 2009 and beyond.

Is there any phrase more likely to get a forecaster in trouble than “It’s different this time”?

Soaring home prices unsustainable? “It’s different this time.” Tech stocks’ P/E ratios look insane? “It’s different this time.”

But here’s one we’ve heard a lot recently: A V-shaped recovery due to a deep recession? “No way, it’s different this time.”

Will signs like this one be more popular than most people expect? (Getty Images)

The Great Recession has been so deep, so painful and so destructive that most economists remain highly skeptical of anything but a tepid recovery. Although in the past most sharp downturns have been followed by swift, V-shaped recoveries, the majority of forecasters right now shake their heads at such a prospect, claiming it’s going to be different — that growth will be much less likely to rebound swiftly this time.

Just yesterday, New York Fed President William Dudley echoed the consensus. “There are a number of factors which suggest that the pace of recovery will be considerably slower than usual,” he said in a speech.

But a few observers are noting how much the consensus breaks with recent history.

“What is interesting though is not that this view [that the recovery will be muted] is generally accepted, but rather how unusual it is,” said Dan Greenhaus of Miller Tabak in a research note. “Our economy has suffered downturns before although the majority of post WWII recessions have not been quite as deep, or caused by the same factors, as the current recession. As a result, there are no real parallels in terms of judging how our economy may emerge. In light of this, economists that are attempting to gauge the strength of a recovery have tossed aside a previous relationship that has suggested the depth of any given recession is related to the strength of the recovery.”

Tim Bond at Barclays Capital, meanwhile, wrote in the Financial Times about the potential of a stronger than expected recovery in the U.S. He argues that the steep drop in payrolls was likely triggered by panicky managers who over-reacted. As the economy recovers, they may find themselves having to restaff faster than expected. Meanwhile, he argues that the effect of household deleveraging has been overemphasized.

“The standard cyclical timing of a U.S. economic turning point tells us pessimistic expectations are likely to collide with the economic reality of a strong recovery,” Bond wrote.

James Paulsen of Wells Capital Management also has made the argument that panic has made forecasters overly pessimistic. “The complete collapse of economic activity can only be explained by healthy consumers and businesses which were ‘frozen with fears’ about the second coming of the Great Depression and simply stopped all economic behaviors for a time. Once the depression scenario was widely dismissed, healthy players regained some confidence and began spending and hiring again,” he wrote in a research note earlier this month. “As fears recede further, healthy players will contribute even more to the recovery.”

He says that multiple factors could contribute to a stronger than expected recovery. Among them are the massive stimulus in the pipeline, a smaller burn rate from housing and autos and a rising savings rate being partially offset by improving net exports.

And there’s also Michael Darda, chief economist at MKM Partners, who says the intense narrowing in high-yield debt spreads of late points to a 4% growth rate in GDP next year — twice the consensus forecast. “Consensus forecasts, which were far too optimistic a year ago at this time, are now likely far too pessimistic about year-ahead prospects,” he said in a research note today.

The pessimists make the case that the massive effect of the bursting of the credit bubble on the consumer can’t be understated. “Since consumers make up over 70% of the economy, if they are not a driving factor of the recovery — which we believe will begin later this year — then the speed of the recovery will likely be impaired,” said Joseph LaVorgna at Deutsche Bank. “Household spending has played a substantial role in virtually every economic recovery in the post-WWII era.”

Maybe it’s different this time.