Links 6/19/08

When it comes to global banks, size matters Gillian Tett

Too Big To Fail, Politically Simon Johnson. Every reform-minded economist hates the Obama white paper. Bankers seems pretty happy, though.

Volcker: Sure, don’t regulate the hedge funds much. But don’t let them mooch off the safety net, either. Robert Johnson

Roubini: New Regulations "Go in the Right Direction," But Not Far Enough Tech Ticker. Roubini is so diplomatic when it comes to Summers and Geithner.

The lessons of 1937 Christina Romer

Hoover or Roosevelt? Obama gets comparison to past presidents New Deal 2.0

US Says Seized ‘Treasury Bonds’ Are Not The Real Thing WSJ

Equity Compensation for Long-Term Results WSJ

Homosexual behaviour widespread in animals according to new study Telegraph

After Pilot Dies, Jet Lands Safely in Newark NY Times

Martin Wolf Speak, You Listen CJR. This is a derivative of the Great Depression II meme which Martin Wolf picked up on.

Toxic Chemicals – New Toxic Chemicals to Avoid Daily Green

Outsider in the world of economics takes a dim view of ‘rotten’ banks Irish Independent. Interview with Jamie Galbraith.

The next big investment bubble Money Week

If FedEx is losing money, you know the economy is in bad shape – Credit Writedowns

Polls find rising concern with Obama on key issues Reuters. Is the honeymoon over?

La mora bancaria alcanza el 4,420% en abril, la ms alta desde agosto de 1996 Finanzas (Spain). Loan delinquency in Spain is at a 13 year high and still increasing. Because Spanish loans are not marked to market more of the losses lie ahead of us than in the U.S.

Antidote du Jour:


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About Edward Harrison

I am a banking and finance specialist at the economic consultancy Global Macro Advisors. Previously, I worked at Deutsche Bank, Bain, the Corporate Executive Board and Yahoo. I have a BA in Economics from Dartmouth College and an MBA in Finance from Columbia University. As to ideology, I would call myself a libertarian realist - believer in the primacy of markets over a statist approach. However, I am no ideologue who believes that markets can solve all problems. Having lived in a lot of different places, I tend to take a global approach to economics and politics. I started my career as a diplomat in the foreign service and speak German, Dutch, Swedish, Spanish and French as well as English and can read a number of other European languages. I enjoy a good debate on these issues and I hope you enjoy my blogs. Please do sign up for the Email and RSS feeds on my blog pages. Cheers. Edward


  1. Diego


    mortgage loan delinquency:

    – US, Q1 2009: 5.22%
    – Spain, March 2009: 2.8%

    The Spanish (Continental European) mortgage system is different from the US-UK system. If you don't pay your mortgage, not only do you lose your house, but part of your income, too, by a judge's order.

    The only ways for a Spaniard not to pay their mortgage would be: 1) working indefinitely in the informal sector; 2) immigration out of Europe. Both options mean less income and a far lower quality of life, anyway, than paying their mortages.

    This means mortgage delinquency leads to foreclosure in the US, but it is mostly a delay in payment in Spain.

    Spaniards will suffer. Not so their banking system (which, paradoxically, may mean Spaniards will not suffer all in all as much as with an Anglo-Saxon system).

  2. Diego

    Another piece of data: mortgage debt as %GDP (2006, couldn't find for later years):

    Denmark, 98.1%
    UK, 82.8%
    US, 79%
    Netherlands, 72.6%
    Spain, 56.1%
    Germany, 42.3%

    Spain is closer to Germany than to mortgage-bubbled UK and US. This is a remarkable feat since homeownership in Spain is around 90% compared to barely 50% in Germany.

    Spaniards take a mortgage to buy their homes, but they never, ever refinance for consumption. (OK, I've met a couple of financially irresponsible exceptions, but it never was even a big minority).

  3. Sivaram Velauthapillai


    Do you know if secrutization of Spanish mortgages (i.e. package mortgages and sell them off to investors) was popular?

  4. Diego


    no, securitization in the US sense (MBS) wasn't popular, because the originator had to have a big stake on mortgages and the Bank of Spain forbade putting MBS on off-balance sheets.

    Covered bonds grew increasingly popular, but they were backed by all mortgages issued by a bank (not only a subset, such as subprime or Alt-A), and sometimes even by all mortgages issued by a group of banks.

    You can learn more here:

  5. Hugh

    Ever since the first goofy comparisons of Obama to FDR, I have been saying the apter comparison is to Hoover. We need fresh thinking, solutions that work, instead we are getting inertia.

    As for Volcker, he should have gone further and said neither banks nor pension funds should get involved with hedge funds and high risk speculative investing.

    Finally, there seems to be an unstated rule among economists not to criticize anyone who helped them earlier in their career. Roubini goes soft on Summers just like you will never catch Krugman directly criticizing Bernanke. This may be very gentlemanly but it really hits their credibility.

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