Is Banks’ Home Bias Good or Bad for Public Debt Sustainability?

Introduction and literature Issues related to the entrenched sovereign-bank nexus, particularly home bias—banks’ holdings of sovereign domestic debt—have gained prominence during the Global Crisis in recent years as public debt was rising especially in the European periphery.1Prompted by foreign investors’ flight as well as cheap Long-Term Refinancing Operations (LTRO) funding from the ECB, many peripheral […]

Turkey: The markets’ Cinderella Man

Seen as one of the most vulnerable emerging markets (EMs) not too long ago, Turkey is on a Cinderella run, attracting significant capital inflows. Foreigners’ net equity and bond investments rose by $0.9 and 1.4 billion respectively during the last four weeks. Here is the intro. to my latest Hurriyet Daily News (HDN) column, where […]

Three Developments in China

After depreciating earlier this year, China’s yuan now appears to be carving out a trading range.  The dollar has been confined to roughly CNY6.20-CNY6.2650 since early April. Recent data lends credence to our view that the Chinese economy was stabilizing with annualized growth a little above 7%.  Although officials have clearly indicated a reluctance for […]

Larry Summers’ Contradictory and Dishonest Defense of Administration’s Bank-Focused Crisis Response

If you are going to succeed in rewriting history, a necessary condition is that the public doesn’t remember it very well. Unfortunately, that requirement is not in place for the architects of the Administration’s blatantly bank-friendly crisis responses. Timothy Geithner’s book Stress Test, in which he tries selling the idea that rescuing the banks was […]

Banking on the Government

By Jesus Gonzalez-Garcia and Francesco Grigoli: (Version in Español) Government ownership of banks is still common around the world, despite the large number of privatizations that took place over the past four decades as governments reduced their role in the economy. On average, state-owned banks hold 21 percent of the assets of the banking system worldwide. In Latin American […]

Is Credit Suisse Really in Jail?

Credit Suisse’s guilty plea to a charge of tax fraud seems to be a major step forward for a Justice Department that was satisfied both before and after the financial crisis with toothless deferred prosecution agreements and large-sounding fines that were easily absorbed as a cost of doing business. A criminal conviction certainly sounds good, and I […]

Are Banks Too Large? Maybe, Maybe Not

By Luc Laeven, Lev Ratnovski, and Hui Tong Large banks were at the center of the recent financial crisis. The public dismay at costly but necessary bailouts of “too-big-to-fail” banks has triggered an active debate on the optimal size and range of activities of banks. But this debate remains inconclusive, in part because the economics of an “optimal” […]

French Banks Play Russian Roulette

In the fourth quarter of last year, with tensions rising between Russia and the West over Ukraine, U.S., German, UK, and Swedish banks aggressively dialed down their credit exposures in Russia.  But as the graphic above shows, French banks, which have by far the highest exposures to Russia, barely touched theirs.  At $50 billion, this […]

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