If anyone had any doubts as to whether the Federal Reserve should assume the role of systemic risk regulator, a comment in the Financial Times by Board of Governors member Kevin Warsh, based on a speech he is to give later today, puts the matter firmly to rest. No matter how logically positioned a central […]
Read more...As readers may know, the financial reforms proposed by the Obama administration barely deserve the name. The late-in-the-game efforts to rebrand the effort by putting Paul Volcker in the forefront and patch up one of the gaping holes, that the government is backstopping risky trading businesses (Goldman Sachs has issued FDIC guaranteed bonds) illustrates the […]
Read more...The New York Times writes tonight about strategic defaults on mortgages, and argues that enough mortgages are deeply enough under water to induce solvent borrowers to think about walking away: New research suggests that when a home’s value falls below 75 percent of the amount owed on the mortgage, the owner starts to think hard […]
Read more...We’ve argued that the “Volcker Rule,” which would limit “proprietary trading” by banks, is in theory a very good idea, but the proposal put forward by Volcker/Team Obama goes wide of the mark by defining any customer trade as not being part of proprietary trading. That’s a spurious distinction; large-scale position-taking well beyond what was […]
Read more...Ambrose Evans-Pritchard today has his usual type of offering: extreme, but nevertheless based on a valid observation, on his favorite hobbyhorse, the EMU. His key observation comes at the end: EMU architects were warned in the early 1990s that monetary union would prove unworkable as constructed. They scoffed, sure that any crisis could be exploited […]
Read more...You have to love it. If the allegations prove true, it provides further evidence that the banksters cannot contain themselves. Here they get their bacon saved by the TARP (which was way too cheaply priced relative to the risk involved) and a host of hidden subsidies and supports. Yet the employees cannot stand to let […]
Read more...Paul Volcker has an op-ed in the New York Times that made my stomach sink. I had considerable hopes for Volcker’s involvement in financial reform; he’s one of the few regulators with the stature (literally and figuratively) who can say things to bankers, the media, and government officials that are unpalatable yet need to be […]
Read more...We have a President who, in his displays of pique against banksters, can work himself up to calling them “fat cats”. But immediately after that, um, display, he met with bank CEOs (well, the ones that didn’t stand him up) and was conciliatory, when the right move would be to show some steel. And when, […]
Read more...Is the modern version of “Beware of Greeks bearing gifts” “Beware of ‘reform’ proposals that bankers favor”? The fact that banksters seem to be bowing to the inevitable, that they will have to submit to some changes in how they do business, should be a step in the right direction. But their inability to accept […]
Read more...If anyone had any doubts that Obama rhetoric does not comport with his conduct, consider Exhibit A, courtesy reader DoctoRx. This is what Obama said in the State of the Union address: We face a deficit of trust – deep and corrosive doubts about how Washington works that have been growing for years. To close […]
Read more...Mervyn King, the governor of the Bank of England, gets it. Why does he have so little company on this side of the pond? King discussed what it would take to fix the financial services industry, and it’s more ambitious than anything you see under consideration in the US. Per the Independent: The Governor said […]
Read more...We’ve said that a Tobin tax, meaning a tax on transactions, could help both as a financial reform measure and as a tax generator. The logic is that trading, particularly OTC trading, involves costs (periodic taxpayer-funded bailouts) that are not borne by the buyers and seller (ie, they should be paying for rescue insurance as […]
Read more...Oh, this is starting to get VERY interesting. L’affaire Fed/AIG is beginning to smell a little like Watergate, where an imperial organization that thinks it writes its own rules (then the Nixon administration, here the Fed) fights tooth and nail to keep certain activities hidden well away (recall, for instance, the Saturday night massacre). Now […]
Read more...The Administration put on a full court press this weekend to shore up Bernanke’s confirmation vote, which was looking increasingly doubtful as of Friday. Over the weekend, Democratic and Republican leaders in the Senate said they were confident that Bernanke would be confirmed. The media took up the call, with stories appearing in virtually every […]
Read more...Early on in the TARP fee discussion, we mentioned in passing that it would probably have an impact on repo financing. Repo means “sale with agreement to repurchase.” It’s a pawn-broker-like procedure that involves securities. The borrower gets to park his holdings with another party, with an agreement to buy them back at a specified […]
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