When I was in the UK earlier this year, I saw a very senior financial regulator speak. In the Q&A session, someone asked him to comment on US financial reform. His reply was tantamount to “Wake me when it’s over,” and it was clear his expectations were low. One source of frustration is that the […]
Read more...The reporting so far is thin, just notices of the announcement at Bloomberg and the Wall Street Journal that Moody’s cut the rating on Portugal’s sovereign debt from Aa2 to A1. The Bloomberg headline notes that Moody’s put the outlook as stable, while the Journal pointed out that the agency expected “Portuguese government’s financial strength […]
Read more...Der Spiegel (hat tip reader Richard Smith) presents a detailed sketch of German thinking, specifically that of chancellor Angela Merkel and finance minister Wolfgang Schäuble, regarding how countries who fail an initial round of restructuring within the eurozone would be treated. This piece is very much worth reading, but the German proposal has all the […]
Read more...By Wallace C. Turbeville, the former CEO of VMAC LLC and a former Vice President of Goldman, Sachs & Co. who writes at New Deal 2.0 William D. Cohan’s op-ed piece in the July 7th New York Times had the same title as this article, but for the word “Don’t.” At first glance, I thought […]
Read more...We’ve pointed out from time to time that the financial services industry has lost sight of its role. While helping companies borrow and raise money, providing investment and saving vehicles and payment services are all useful activities, the cost of financial intermediation is ultimately a tax on commerce. Perversely, some businessmen complain bitterly about how […]
Read more...Distressing news continues to accumulate on the small business front. Smaller companies have been particularly hard hit by the downturn. Some of that goes with the terrain, since small businesses are more fragile than bigger ones. Nine of ten startups do not survive their first ten years. Even in typical recessions, banks cut off lending […]
Read more...→ Rajiv Sethi In a recent paper on financial innovation and fragility, Gennaioli, Shleifer and Vishny argue that investors (and often also financial intermediaries) are hobbled by certain systematic cognitive biases that cause them to neglect unlikely events when assessing asset values. They argue that such “local thinking” results in the creation and excessive issuance […]
Read more...Is the economics version of defining deviancy downward mean that the new normal of high unemployment and inadequate job growth is seen as acceptable by policymakers (at least those not up for re-election this November)? It’s one thing to recognize that we are working through a painful hangover after a private sector borrowing binge that […]
Read more...The New York Review of Books has an article by George Soros with his take on the challenges facing the Eurozone. It includes a good, high level recitation of the structural deficiencies in the Eurozone (in particular, its lack of a treasury), the evolution of recent stresses, and suggested remedies. While the initial discussion covers […]
Read more...Although it was unclear how the high concept behind the Volcker rule would translate into legislation, we had doubts from the get-go. The idea is sound: firms that are ultimately playing with government money should be involved only in socially valuable transaction intermediation and fundraising (and all major dealers around the world are backstopped, pretenses […]
Read more...The alert John Dizard of the Financial Times has taken notice of a development that has passed most commentators by, namely, that Greece is starting to restructure state debts. This hasn’t yet gotten the attention it merits because it’s bonds issued by particular government bodies (in this case, the Greek state hospital system) and the […]
Read more...I had the pleasure of finally meeting Steve Keen (he and his wife Melina are in New York) and it turns out he is adventuresome eater as well as thinker (he ordered maguro and natto even though I warned him, although I must say this restaurant’s version was actually gaijin friendly). Steve told me about […]
Read more...The stress tests conducted on 19 large American banks by the US Treasury in 2009 were an amazingly effective exercise in salesmanship and sleight of hand. Banking industry experts, including Bill Black, Chris Whalen, and Josh Rosner, dismissed the process as mere theatrics: too little staffing and not enough “stress” in the economic forecasts and […]
Read more...By Marshall Auerback, a portfolio strategist and fund manager Wolfgang Munchnau is right. Only a closer union can save the euro. In the longer term, it will be necessary to put in place a permanent fiscal arrangement through which the central euro zone authorities distribute funds to be used by member nations. Ideally this should […]
Read more...The Financial Crisis Inquiry Commission grilled Goldman chief operating officer Jonathan Cohn and CFO David Viniar this week, with today’s session focusing on AIG, and in particular, whether Goldman’s collateral calls were abusive and damaged the insurer. Readers know that I have perilous little sympathy for Goldman. However, it is important that investigations focus on […]
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