We pointed out that reappointing Ben Bernanke as Federal Reserve chairman would be inconceivable in the private sector, since CEOs who preside over disasters are dismissed (captains have the good taste to go down with their ships). But of course, Bernanke is a failure only if you believe that the Fed’s official mandate – soundness […]
Read more...This post first appeared on July 11, 2007 Readers of this blog know that I have been concerned about the state of the credit markets for some time. We’ve had (until the last month or so), rampant liquidity feeding asset bubbles in virtually every asset class except the dollar and the yen, tight risk spreads […]
Read more...Nassim Nicholas Taleb has an intriguing piece at Huffington Post, “The Regulator Franchise, or the Alan Blinder Problem,” with a juicy anecdote at its core. It highlights a critical issue: how we’ve come to accept what other eras would view as dubious conduct as business as usual. Note that Taleb does a particularly artful job […]
Read more...It should come as no surprise that a financial services industry powerful enough to water down meaningful reform in the US and internationally (Basel III rules were weakened to allow, for instance, that mortgage servicing rights be included in regulatory capital calculations) would probably have its way in blocking the nomination of Elizabeth Warren as […]
Read more...Readers may recall that the Federal Reserve created three vehicles to hold dodgy assets it obtained via the Bear and AIG bailouts, namely Maiden Lane (for Bear), Maiden Lane II (for AIG residential mortgage backed securities) and Maiden Lane III (for CDOs the Fed bought as part of taking out AIG credit default swap counterparties […]
Read more...Why oh why is it that the US media treats financial services compensation levels as a third rail issue? Rent extraction was the driver of the financial crisis, and the financial services sector made it clear in 2009, by paying itself record bonuses on the heels of being saved from certain death, that it had […]
Read more...Cross-posted from The price of everything By Tim Price, Director of Investment at PFP Wealth Management, a London-based fund manager “More than half of all workers have experienced a spell of unemployment, taken a cut in pay or hours or been forced to go part-time. The typical unemployed worker has been jobless for nearly six […]
Read more...This post first appeared on May 1, 2007 Due to Paul Volcker’s having broken the back of inflation in the early 1980s, and Alan Greenspan performing what appears to be adequately on the substance of his job and masterfully at the showmanship, the Fed’s reputation is at an all time high. And that in and […]
Read more...This post first appeared on March 26, 2007 The post below is from a reader, DS. He focuses on the fact that the Fed has basically admitted that its powers are limited due to the extent of financial activity that takes place outside its purview (the Fed supervises federally-chartered banks; securities firms, which are regulated […]
Read more...Back to this thing to try to work out what it’s driving at. Yves wrote: I have serious trouble with its bottom line: We document that the shadow banking system became severely strained during the financial crisis because, like traditional banks, shadow banks conduct credit, maturity, and liquidity transformation, but unlike traditional financial intermediaries, they […]
Read more...This post first appeared on February 14, 2007 An excellent column by Martin Wolf in the Financial Times, where he is the lead economics editor. Starting with principles put forward by Ben Bernanke in his recent speech on income inequality, Wolf concludes that America cannot do without some form of a welfare state, specifically improved […]
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...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...This is a wonderful short video by RSAnimate based on a talk by radical, as in Marxist, sociologist David Walker. For those who recoil, Marx was the first to take note of the propensity of capitalism towards instability. By contrast, neoclassical economics, which has dominated policymaking in advanced economies, posits that economies have a propensity […]
Read more...The New York Times has unearthed a damning tidbit about the bailout of AIG: When the government began rescuing it from collapse in the fall of 2008 with what has become a $182 billion lifeline, A.I.G. was required to forfeit its right to sue several banks — including Goldman, Société Générale, Deutsche Bank and Merrill […]
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