Yearly Archives: 2011
A suspicious sniff at CoCos
Contingent Convertible bonds (“CoCos”) are supposed to address this nonsensical phenomenon: During the financial crisis a number of distressed banks were rescued by the public sector injecting funds in the form of common equity and other forms of Tier 1 capital. While this had the effect of supporting depositors it also meant that Tier 2 capital […]
Read more...“Summer” Rerun: Why You Should Hate the Treasury Bailout Proposal
This post first ran September 21, 2008 A mere two weeks ago, the Fannie/Freddie rescue was called “the mother of all bailouts” by some commentators. If the plans of the Administration come to fruition, it will shortly be surpassed by the $700 billion mortgage rescue plan proposed by Hank Paulson late last week. The increase […]
Read more...What are the preconditions for Hyperinflation?
People arguing that hyperinflation is around the corner usually are pushing this view because of an ideological bias against fiat money. This is a bias I share because I believe that fiat money allows excessive money creation that winds up as a credit super bubble – and our experience over the past 40 years demonstrates this. However, I don’t let this bias get in the way of my analysis of the economics of the situation. I have a better understanding of the fiat money system because I am not anchored in a gold-standard mentality when looking at the constraints on government in the fiat money system and the types of events that lead to hyperinflation. The hyperinflation talk is a gimmick used to push a particular ideological viewpoint. While I share that viewpoint and don’t like fiat money, I am not a fear monger, so you won’t see pushing an ideological agenda which has the economics wrong.
Here are a few bullet points that are salient for understanding fiat money and hyperinflation.
Read more...Links 4/8/11
Faulty Reasoning Behind Calomiris Post Dodd Frank Reform Proposals
I hate to take issue with a post by Mike Konczal on some Dodd Frank reform ideas posed by Charles Calomiris in “Beyond Basel and Dodd Frank“, since Mike is usual a source of reliable analysis. But that’s why it’s particularly important to let one of the rare times he goes off beam not to lend credence to reform ideas that are sorely wanting.
The problem in general with Dodd Frank and subsequent fixes is they don’t come close to doing what needed to be done, which is dramatically reduce the ability of financial players to wreck the economy for fun and profit. The fact that the banks howl bitterly over some half-hearted measures should not be mistaken for effectiveness. The big dealer banks have realized that they’ve emerged more powerful and better able to extract rents than before the crisis, so why not press their advantage? Their new position is that any restriction on their profit-seeking is an intrusion and should be beaten back. Witness some recent evidence: their foot-dragging on clearinghouses for swaps. The normally accommodating New York Fed is forming a group to “compel” the banks to live up to their commitments. Of course, with enablers like Timothy Geithner, who has signaled that he is leaning toward exempting foreign exchange derivatives from Dodd Frank implementation, the banks don’t have to fight all that hard.
Let’s turn to the current debate.
Read more...It’s Now Official: No More Joint Federal/State Attorney Mortgage Settlement Effort
Housing Wire has confirmed what American Banker and the New York Times had indicated was underway, namely, that the formerly joint state/federal effort to deal with foreclosure abuses (still undefined beyond robosigning and improper affidavits) are now separate initiatives. We think that’s a good thing, since the state and federal law issues were so different that it made the idea of a grand global settlement seem a tad deranged, particularly on the fast timetable the Obama crowd was pushing for. As a reader with securities law regulatory experience noted via e-mail:
Read more...Whoever was leading this charge for the Feds totally miscalculated.
Reader Notice
Dear patient readers,
I will be largely off the grid from Friday AM till Tuesday AM (I wish this was a holiday, but it should at least be interesting). Richard Smith will be ably minding the store. Please be nice to him.
There is actually a very big development in the UK on Monday which Richard will cover, namely, the publication of the preliminary version of the Independent Banking Commission report. It is expected to endorse either a partial or full split of retail banking from other bank operations. Given the size and importance of financial services to the UK, it may raise the obvious question: why have US reforms been so limited?
Read more...Guest Post: Ongoing Cover Up of Nuclear Crisis By Governments and Nuclear Power Companies
The Japanese and American governments, Tepco, Ariva and other nuclear power companies are covering up the severity of the Japanese crisis.
Read more...Washington AG Investigates New Foreclosure Abuse Front: Trustee Non-Compliance
LoanSafe reports that the Washington state attorney general, Rob McKenna, has uncovered a likely widespread violation of state law, that foreclosure trustees lack a physical presence as required and a means for borrowers to contact or visit them to submit last minute payments or present documentation. McKenna’s interest appears to result from the fact as with servicers, the foreclosure trustees are not accessible to borrowers and not responsive when there may be legitimate reasons to halt or delay a foreclosure. Note that Washington is a deed of trust state, and the foreclosure trustee handles certain tasks relative to the actual foreclosure. This is a different role than that of the securitization trustee, who is the agent of the securitization trust, the legal entity that holds the loans in the securitization.
Read more...Kloppenburg Wins WI Supreme Court Election, Turfing Out Incumbent Prosser; Maybe
WI Supreme Court incumbent loses by a narrow margin; recount to come
Read more...Links 4/7/11
ACLU Taking Aim at Florida’s Kangaroo Foreclosure Courts (Updated With Court Filing)
Per Lisa Epstein and April Charney, the ACLU has announced it is contesting the procedures used in Florida’s recently created foreclosure courts:
Read more...Rationalization of Biggest Foreign Bank Bailout Misses Regulatory Failure
Some aggressive spinning on the Fed data releases about its lending during the financial crisis has surfaced at Bloomberg (admittedly with some less favorable facts also included). The Friends of the Fed and other Recipients of Largesse are defending the central banks’ panicked and indiscriminate responses to the crisis. These efforts to rationalize emergency responses fail to acknowledge underlying regulatory failings that remain unaddressed.
The PR push surrounds the foreign bank that got the most support during the post-Lehman phase, namely, Dexia.
Read more...
