- Our Real Worry Isn’t the Debt, It’s Our Politicians
- Links for 02-26-2013
- Fed Watch: ECB Should Pledge to Not Do Anything Stupid
- 'How To (Maybe) End Too Big To Fail'
- 'Fix the Economy, Not the Deficit'
- Links for 02-25-2013
Posted: 26 Feb 2013 11:11 AM PST
We are, as they say, live:
Posted: 26 Feb 2013 12:03 AM PST
Posted: 25 Feb 2013 03:23 PM PST
ECB Should Pledge to Not Do Anything Stupid, by Tim Duy: Market participants were rattled today by the election news out of Italy, as it looks like the economically-challenged nation is now politically adrift. But what exactly might worry investors? I pulled this quote from Bloomberg:
Posted: 25 Feb 2013 01:40 PM PST
This is from a St. Louis Fed write-up of the following Dialogue:
St. Louis Fed economist William Emmons led the Dialogue, titled "Robo-signing, the London Whale and Libor Rate-Rigging: Are the Largest Banks Too Complex for Their Own Good?" Joining Emmons for the Q&A that followed were Mary Karr, senior vice president and general counsel of the St. Louis Fed; Steven Manzari, senior vice president of the New York Fed's Complex Financial Institutions unit; and Julie Stackhouse, senior vice president of Banking Supervision and Regulation at the St. Louis Fed. See the videos and Emmons' presentation slides at www.stlouisfed.org/dialogue.Here's the last part of the write-up on dealing with the too big to fail problem:
The Big Banks: Too Complex To Manage?, Central Banker, Winter 2012, FRB St. Louis:A strictly enforced "death penalty" sounds good to me, but I'd also like to reduce the ability of large financial institutions to influence politicians and regulators. The discussion does note that:
The revelations of recent controversies such as robo-signing, the London Whale and Libor rate-rigging—explored in the "Big Bank Misbehaviors" sidebar at the bottom—as well as other problems not mentioned here indicate that something critical was lacking in the discipline of large, complex banks.But the regulatory capture aspect of large banks isn't addressed.
I mostly wanted to highlight this slide from the presentation because it answers a question I've been asking for a long time, how big do banks need to be in order to reach the minimum efficient scale?
And from another slide, the size of the largest banks:
Some summary measures:
The conclusion seems obvious to me.
Posted: 25 Feb 2013 09:00 AM PST
Fix the Economy, Not the Deficit, by Dean Baker, The American Prospect: It's hard to be happy about the prospect of the sequester ... going into effect at the end of the week. Not only will it will mean substantial cuts to important programs; it will be a further drag on an already weak economy, shaving 0.6 percentage points off our growth rate. ...
Of course, it could be worse. Half of the cuts are on the military side. This will help to bring our bloated military sector closer to its pre-September 11 share of the economy, and going forward, the principle that domestic cuts be matched by cuts in defense spending is certainly better than the idea of attacking domestic spending alone. In addition, the most important programs in the budget—Social Security, Medicare, and Medicaid—have been largely spared the ax—an important victory in the 2011 negotiations. ...
The next step at that point is unclear. President Obama has explicitly offered cuts in Social Security and Medicare if the Republicans will go along with higher taxes. For those who oppose cuts to these programs, the generous view of this maneuver is that he knows that the Republicans won't budge on taxes; by offering a compromise, he is simply making them look unreasonable. The less generous view is that he is actually willing to make cuts in these programs, sharing the view of Washington Post-centrist types that seniors are living too high on the hog.
While the odds are against a "grand bargain" that couples tax increases with cuts to Medicare, Medicaid, and Social Security, it remains a possibility. However, it's more likely that President Obama and Congress will agree to some scaled-down version of the sequester... This will have the deficit hawks yelling and screaming, but that would be the best plausible outcome from the standpoint of the economy. ...My view is of the less generous variety. I think Obama is quite willing to make these cuts.
Posted: 25 Feb 2013 12:03 AM PST