tag:blogger.com,1999:blog-582368152716771238.post8360060041236193698..comments2024-03-28T05:14:02.071-05:00Comments on The Grumpy Economist: Wallison on financial regulationJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-582368152716771238.post-2257102135643221892012-03-04T18:40:31.708-06:002012-03-04T18:40:31.708-06:00Of course, it does.Of course, it does.Irineu de Carvalho Filhohttps://www.blogger.com/profile/14102218468110108053noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-54188195493599582582012-02-27T23:29:17.324-06:002012-02-27T23:29:17.324-06:00Financial regulation is a form of regulation or su...Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system. This may be handled by either a government or non-government organization.<br /><a href="http://www.settlement-cash-structured-for-flow.com/" rel="nofollow">sell structured settlement </a>Structuredsettlementhttps://www.blogger.com/profile/00468648370225067609noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-77835747208299718102012-02-18T18:17:48.624-06:002012-02-18T18:17:48.624-06:00LAL
I think the government should deal with the b...LAL<br /><br />I think the government should deal with the banking risk at source by simply outlawing naked derivatives - so you could buy a guarantee on a bond only if you owned the underlying bond and then only to the amount of the bond that you held.Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-70571970522702951572012-02-15T22:21:58.590-06:002012-02-15T22:21:58.590-06:00Well it is clear what should happen: the governmen...Well it is clear what should happen: the government should hire someone to go to the parties to monitor our children. Stop the risk of inter-connected-ness at the source...you know as opposed to sensibly regulating and controlling drugs and alcohol....LALhttps://www.blogger.com/profile/08196675112184615614noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-27759300083419432012-02-14T15:12:40.645-06:002012-02-14T15:12:40.645-06:00The banking system was saved because the governmen...The banking system was saved because the government flooded the system with money. <br /><br />We know that the Banking system has created enormous systemic risks by creating hundreds of trillions of dollars in naked derivatives (naked in the sense that there is no real underlying commercial interest).<br /><br />The argument put forward by the anti-regulation folks sounds like a teenager talking:<br /><br />Boy "I'm going to a party with drugs and alcohol and fast cars."<br />Father "That's a really bad idea. The last party you went to one of your friends, Lehman, died."<br />Boy "That was Lehman, that was not me, I did not die the last time, so its not dangerous for me to go to the next party."Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-88398733991004697632012-02-14T09:56:49.548-06:002012-02-14T09:56:49.548-06:00Whatever Dodd and Frank were up to, the idea that ...Whatever Dodd and Frank were up to, the idea that relaxation of government lending standards was responsible for the housing bubble is just a myth (and one that Wallison fervently subscribes to). All you have to do to confirm this is look at the default rates of Fannie/Freddie - backed loans vs private loans to confirm that.<br /><br />MBS originators on wall street needed no encouragement from government to make a killing packaging mortgages (or carbon-copying them into CDOs). And private lenders needed no encouragement from government to further relax their lending standards when they knew they could sell it to wall street no matter how crappy the terms of the loan and the creditworthiness of the borrower. I'm not sure where you get your $10-$12 billion figure, but it is genuinely laugable. Do you have a source for that?JSRhttps://www.blogger.com/profile/09614849295823728127noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-15853891930915216832012-02-14T09:55:45.844-06:002012-02-14T09:55:45.844-06:00This comment has been removed by the author.JSRhttps://www.blogger.com/profile/09614849295823728127noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-88413284158213218152012-02-14T09:45:40.454-06:002012-02-14T09:45:40.454-06:00I agree with the thesis that Dodd Frank will likel...I agree with the thesis that Dodd Frank will likely be ineffective and lead to market distortions. Increasing shareholder liability (as Tyler Cowen suggests) would be an interesting market-based alternative.<br /><br />Having said that, I think Dodd Frank is an improvement on the status quo: large institutions already dominate and have paid no real penalty for their recklessness. Dodd Frank will at least reduce the likelihood of future runs by reducing interconnectedness, and will fund potential bailouts by taxing "systemic" institutions. I've yet to see a conservative alternative to Dodd Frank proposed on capital hill that would actually address any of these issues. Doing nothing at all would be the worst course of action.JSRhttps://www.blogger.com/profile/09614849295823728127noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-55225852102299237122012-02-14T09:38:41.160-06:002012-02-14T09:38:41.160-06:00Are you out of your mind? Dodd and Frank were up t...Are you out of your mind? Dodd and Frank were up to their eyeballs in encouraging the behavior that lead to the crash. It was anything goes so long as more people got home loans, regardless of their ability to pay. Without that government involvement there would simply have not been enough mortgages to build the MBS market into such a behemoth. The MBS market in turn created an ever growing demand for more mortgages. The estimates are that MBS creation was limited to 10-12 $Billion without relaxing of lending standards, which Dodd and Frank defended every time it was even suggested this could lead to problems.<br /><br />It isn't so much foxes minding the henhouse as foxes minding other foxes.epobirshttps://www.blogger.com/profile/15584564334924010440noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-65394149037475732022012-02-14T04:20:12.970-06:002012-02-14T04:20:12.970-06:00If Dodd Frank is flawed there are two groups of pe...If Dodd Frank is flawed there are two groups of people responsible: (1) the Republicans in Congress and K street lobbyists for the Banks who did everything possible to obstruct passing any legislation, because they did not want to give Obama a victory; and (2) commentators like you who put out every sentence you could to confuse and obfuscate the issues (my favorite: the bill doesn't deal with Fannie Mae and Freddie Mac).<br /><br />Those who create "the fog of war" have no right to complain when their obstruction results in "collateral damage."<br /><br />Now, the banks are big boys and they could have walked into the Senate and said, we had a run, because we were bad, and this is what you should do. But they didn't. They spent millions in campaign contributions, donations to Cato, and lobbying contracts, all with the message that it was all caused by the Community Reinvestment Act.<br /><br />If Dobbs Frank is bad, it is the price of duplicity, misinformation, and misdirection. It is not the fault of the people who passed the bill.JLDhttps://www.blogger.com/profile/02186957841091998126noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-71377007804389641962012-02-13T18:56:56.500-06:002012-02-13T18:56:56.500-06:00"Instead focus on the run-prone assets"...."Instead focus on the run-prone assets". Isn't a run-prone asset any illiquid asset funded with liquid liabilities with some information asymmetry between the originator and the funder? Doesn’t this describe banking in general?Jameshttps://www.blogger.com/profile/09239051317997043121noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-25376474844148405272012-02-13T17:11:04.786-06:002012-02-13T17:11:04.786-06:00The obvious counter will be that, Well, since the ...The obvious counter will be that, Well, since the government got involved with bailouts and stimulus, then that is why we did not see a cascade of failures. (I don't buy it, but that will be the argument)kyle8https://www.blogger.com/profile/13299846346032212714noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-7900564101674507572012-02-13T14:51:42.487-06:002012-02-13T14:51:42.487-06:00If I recall correctly, there was a major counterpa...If I recall correctly, there was a major counterparty problem -- specifically AIG. Wasn't that why Goldman was buying insurance against AIG's collapse?<br /><br />And I was also under the impression that's why Goldman and AIG's other counterparties are alleged to have received a much bigger bailout than they officially got; AIG was going broke because it had huge debts, and the Fed made sure those debts got paid, an effective bailout for AIG counterparties who would otherwise have taken haircuts or gotten nothing.umhttps://www.blogger.com/profile/00257052260028348733noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-75607648590038736122012-02-13T14:07:06.917-06:002012-02-13T14:07:06.917-06:00Didn't the Reserve Primary Fund break the buck...Didn't the Reserve Primary Fund break the buck because of exposure to Lehman? It then faced a run, but a run based on the fact of exposure to A (or rather L). The run was caused by losses at Lehman.<br /><br />The connection from A to B to C to D was also certainly on the minds of CEOs on Sunday of the Lehman weekend. For just one piece of evidence see Ross Sorkin's Too Big To Fail quoting Jamie Dimon, page 3. This scenario then was averted through government intervention, an entirely appropriate response. Why should this make it less of a concern for designing future government intervention?uwtischhttps://www.blogger.com/profile/06256309581119675928noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-43009054730466386342012-02-13T11:42:07.676-06:002012-02-13T11:42:07.676-06:00You point to a potential weakness in my, and Walli...You point to a potential weakness in my, and Wallison's article -- Ok, that's not what happened last time, but maybe it could happen next time? <br /><br />While logically true, though, basing a thoroguh and very intrusive regulation on stories of what might go wrong seems pretty dangerous. Anvils could fall from the sky. If you watch enough cartoons you start to worry. <br /><br />If you want to go this route, we should first see strong evidence that there is a danger, that banks and SIFIs are not doing enough to address the danger, that this is intentional not an oversight -- that they have strong incentives not to do enough to address the danger -- and the only solution is that they must be extensively and bluntly regulated. Nobody has done that at all with the "chain of dominoes" theory.John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-88866779317137035642012-02-13T10:47:14.103-06:002012-02-13T10:47:14.103-06:00What would you think the chances are that inter-co...What would you think the chances are that inter-connectedness of such large banks, even if it didn't lead to the near-collapses in 2008, would still lead to some sort of collusive behavior that limiting their exposure to each other could possibly reduce?Calivancouverhttps://www.blogger.com/profile/11714105881073755258noreply@blogger.com