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Archive of posts published in the tag: FDIC

Complexity is a Bigger Problem than Size

“My own view is that the problem of too big to fail is really about complexity, not size, and thus “break-up” proposals should focus on simplifying the megabanks so that they can be easily resolved in bankruptcy or the FDIC’s…

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Debt is not Ownership

“We should also recognize that there is a difference between promoting home ownership and promoting home finance. Canada has no mortgage interest deduction, yet it has a comparable rate of home ownership and fewer leveraged home owners. My first preference…

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The Weakest Business Practices

“Not everyone in the industry is bad, and not all members of the industry will be supporting efforts to roll back reform. After two and a half decades in Washington, I have learned that those who are most active in…

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An Insurable Interest

“Dodd-Frank fixed some of that by giving both the SEC and the CFTC authority to regulate the derivatives market. Among other things, the legislation mandated that the SEC and CFTC, working with the banking regulators, set standards for the amount…

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Citigroup’s Special Treatment

  When the preliminary results from the stress tests came back in mid-March, they matched what we had expected to see: Citi (even with its $45 billion in government capital) and a few others would be insolvent under the stress…

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The Best Looking Horse in the Glue Factory

“Another artificial factor stimulating investors’ demand for U.S. debt is the lack of alternatives. Because of Europe’s problems, investors there are limited in their choices of finding safe government-backed securities. In other words, interest rates on U.S. debt remain low…

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Truths In and Out of Favor

“I also quoted a favorite passage of mine from Robert Frost’s poem “The Black Cottage”: Most of the change we think we see in life Is due to truths being in and out of favor. The “truths” that form the…

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Was the Financial Collapse Overstated?

Many traditionalists, including Warren Buffett, lashed out at the stress tests as wrong and unnecessary. He was quoted in the Financial Times complaining that Citigroup’s high-profile problems had tainted the entire industry. Most of the banking institutions were relatively healthy,…

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“Bull By The Horns”- a review

Sheila Bair was the Chairman of the FDIC under Bush and later reappointed under Obama.  In Bull by the Horns she gives her perspective on the housing crisis and the financial collapse. Sheila was a Republican and voted for McCain,…

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The Canadian Lesson on Sound Banking

The default belief  of our economic history of the last 100 years has been an acceptance of the dynamic growth of capitalism punctuated by excesses of market greed that have to be corrected by the singular wisdom of government regulation.…

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Falling Through the Financial Cracks

When those who point fingers seek blame for the financial crisis of 2008 (we are yet to have an official historical name for this disaster) the common refrain is deregulation of the financial industry, but some examination seems to be…

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Lost With the Wrong Map

If you have the cue ball and just one other ball on the pool table lined up for shot in the corner pocket, AND you are a reasonable competent pool player then you can determine with some degree of accuracy…

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Replace the FDIC with the CIIC

Here is an idea for our times. We create a Federal Agency called the Consumer Investment Information Corporation. It is funded by a fee on all banks and institutions needing an independent investment rating. It is governed by nine people;…

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The Other Side of the Microphone

Wall Street’s financial leaders have been paraded before Congress to explain their efforts to restore stability to our financial system. Obama has turned on the populist spigot to demonize Wall Street to justify bigger taxes and fees and hip shot…

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The Myth of Laissez Faire

The quasi-governmental institutions Fannie Mae and Freddie Mac guaranteed  mortgages, which Wall Street happily securitized once the credit rating agencies- which had been given a legally protected oligopoly by the government-declared them to be safe investments.  Government owned banks and…

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Unlimited Fannie Mae

In several past postings reviewing the recent financial meltdown, I have noted the pivotal role played by Fannie Mae. A toxic mix of arrogance and incompetence infected Wall Street.  Bad political, monetary, and tax policy inflated the housing market bubble. …

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The Seeds of our Next Crisis

One of the most intriguing concepts of economics is the concept of “moral hazard.”  It is a corollary to a more obvious principle that everything has a cost. An understanding of it is critical for those whose world view is…

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