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 […]

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 […]

Fannie and Freddie Reform Is Necessary, but Not at Expense of Private-Sector Investment

Private investors and the government don’t always make easy bedfellows and nothing exemplifies this more than the case of Fannie Mae and Freddie Mac. After verging on collapse in 2008, the government-backed mortgage groups are now turning significant profits, but investors are not happy. Since their inception, the structure of Fannie and Freddie has been […]

Water Down the Volcker Rule at Markets’ Peril

The Wall Street Journal reports that the federal financial regulators may yet again carve a  loophole in the Volcker Rule. This time, the issue is whether banks subject to the rule’s proprietary trading prohibitions can hold collateralized loan obligations (CLOs)—structured products engineered out of commercial loans, just like good old collateralized debt obligations were engineered out of […]

SEC Lashes Out at Wolves of Wall Street

The US Securities and Exchange Commission (SEC) has suspended 255 shell companies from trading from 3 February through 14 February to prevent “pump and dump” fraud, and stocks will not be relisted if companies fail to prove they are operational. The suspension took hold at the start of trading on 3 February and will end […]

Better Capital Controls, and Less Interest Rate Hikes, Are What EMs Need

Life is tough if you are a central banker in an emerging market country. Besides dealing with your own country’s macroeconomic conditions, you have to worry about external shocks to a much larger extent than your colleagues in industrialized nations. Further, often due to a history of poor macroeconomic management and hyperinflation, foreign investors still […]

Revisiting Banking Union in a Single Currency Area (Part 2)

The current banking union framework remains far from ideal if the currency union dimension is taken into account. While decisions so far have been focusing on the moral hazard of banks, these measures fail to solve an additional market failure in the Euro area caused by the moral hazard of governments competing on funding costs, […]

Repo Comes Under the Microscope

Introduction On 29 January 2014, the EU Commission published a legislative proposal for a regulation on reporting and transparency of securities financing transactions[1] (SFTs) and associated FAQ document. The EU Commission is concerned that efforts to reform the structure of EU banks (in the form of the Liikanen proposals – see this blog post for […]

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