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Adalberto Palma

WaPo Think this economy is bad? Wait for 2012. 2010.10.24 - 0 views

www.washingtonpost.com/...AR2010102202786_pf.html

shared by Adalberto Palma on 26 Oct 10 - No Cached
  • Mexico's financial crises regularly coincide with presidential elections. In early 1982, the government knew that its deficit was too large and that its currency was overvalued. Investors were pulling their money out, draining the nation's foreign currency reserves. Government officials hoped to postpone action until after the July election, and the Federal Reserve helped by making short-term dollar loans to Mexico designed solely to make its reserves appear larger.
Adalberto Palma

CD President Obama Joins the Cult of Economics Deniers 2011.08.15 - 0 views

www.commondreams.org/...15-4

economics

shared by Adalberto Palma on 15 Aug 11 - No Cached
  • Obama is no longer paying attention to economists and economics in designing economic policy.
  • do what his campaign people tell him
  • Obama intends to focus on reducing government spending and cutting programs like social security and Medicare.
  • ...18 more annotations...
  • stimulus spending, as prescribed by mainstream economic theory, to create jobs and promote growth."
  • Obama intends to ignore the path for getting the economy back to full employment that most economists advocate.
  • interest rates did fall, it is difficult to believe that it would have much impact on either investment or consumption
  • theory as to how budget cuts could boost growth
  • lower deficits in the present and/or near future will reduce fears that government spending will be crowding out private economic activity. This would lead to lower interest rates. Lower interest rates will provide a boost to investment and consumption. Also, lower interest rates in the United States will make dollar assets less attractive to investors. This will cause the dollar to decline against other currencies, improving our trade balance.
  • no part of this story makes sense in the current economic environment. US interest rates are already at ridiculously low levels,
  • vast amounts of excess capacity.
  • doesn't matter at the White House any more.
  • Consumers remain heavily indebted due to the collapse of house prices.
  • The dollar continues to be a safe haven in uncertain times.
  • keep the dollar from falling too much against their currencies no matter how low interest rates fall.
  • unlikely that cutbacks in government spending will do much to lower the dollar and reduce the trade deficit.
  • Obama is apparently not listening to economists anymore, so he wouldn't care, in any case.
  • politicians who think that biology has no place in teaching the origins of species, we now have politicians who think that economics has no place in designing economic policy.
  • tens of millions of lives stand to be ruined.
  • Keynes's basic insights have been supported by a vast amount of economic research over the last seven decades. And we have solid evidence showing (pdf) that the limited stimulus pushed through by Obama in 2009 worked pretty much as predicted in generating growth and jobs.
  • policy will be determined by people with no knowledge of economics whatsoever.
  • evidence,
Adalberto Palma

FN Seismic economic events expose regulatory fault lines 2011.08.15 - 0 views

www.efinancialnews.com/...-expose-regulatory-fault-lines

banks

shared by Adalberto Palma on 15 Aug 11 - No Cached
  • three main measures that governments can use to try and jump-start their economies. They can expand the money supply by decreasing interest rates, printing money (quantitative easing) or lowering the reserve requirements of the banks.
  • The problem is with the third item on the list. The regulators are certainly not lowering reserve requirements; quite the contrary.
  • banks are once again becoming more reluctant to lend to each other.
Adalberto Palma

NY TimesThe Fed's Rescue Missed Main Street 2011.08.26 - 0 views

www.nytimes.com/...rescue-missed-main-street.html

shared by Adalberto Palma on 29 Aug 11 - No Cached
  • funneling hundreds of billions of dollars to large and teetering banks during the credit crisis was necessary to save the financial system
  • fresh and disturbing details about the crisis-era bailouts.
  • Freedom of Information Act
  • ...16 more annotations...
  • provided a stunning $1.2 trillion to large global financial institutions
  • The money has been repaid
  • sketchy collateral
  • surprisingly sketchy collatera
  • Royal Bank of Scotland received $84.5 billion, and Dexia, a Belgian lender, borrowed $58.5 billion from the Fed at its peak
  • provided this much assistance to the biggest institutions for so long, and then to have done in effect nothing for the homeowner, nothing for credit card relief.”
  • financial regulators are captured by the companies they oversee,
  • espouses the principle that all men and women are equal under the law,” Mr. Kane said. “During the housing bubble and the economic meltdown that the bursting bubble brought about, the interests of domestic and foreign financial institutions were much better represented than the interests of society as a whole.”
  • THIS inequity must be eliminated
  • regulators who have a duty to protect taxpayers should require these institutions to provide them with true and comprehensive reports about their financial positions and the potential risks they involve.
  • The banks really feel entitled to hide their deteriorating positions until they require life support.
  • Mr. Todd also questioned the Fed’s decision to accept stock as collateral backing a loan to a bank. “If you make a loan in an emergency secured by equities, how is that different in substance from the Fed walking into the New York Stock Exchange and buying across the board tomorrow?”
  • if we do nothing to protect taxpayers from the symbiotic relationship between the industry and their federal minders, we are in for many more episodes like the one we are still digging out of.
  • EVALUATING bailout programs like the Troubled Asset Relief Program and the facilities extended by the Fed against “the senseless standard of doing nothing at all,” Mr. Kane testified, government officials tell taxpayers that these actions were “necessary to save us from worldwide depression and made money for the taxpayer.” Both contentions are false, he said.
  • “Thanks to the vastly subsidized terms these programs offered, most institutions were eventually able to repay the formal obligations they incurred.” But taxpayers were inadequately compensated for the help they provided,
  • Government officials rewarded imprudent institutions with stupefying amounts of free money
Adalberto Palma

Lex Defining G-SIBs and additional loss absorbency requts 2011.08.12 - 0 views

www.lexology.com/...detail.aspx

banks

shared by Adalberto Palma on 30 Aug 11 - No Cached
  • Cross-jurisdictional activity.
  • the greater the global reach of a bank, the more difficult it is to coordinate its resolution and the more widespread the effects of its failure.
  • Cross-jurisdictional claims
  • ...58 more annotations...
  • Cross-jurisdictional liabilities.
  • take into account the liabilities of all offices of the relevant bank to entities outside the home market and include all liabilities to non-residents of its home jurisdiction.
  • international banks’ activities outside their home jurisdiction
  • Size.
  • bank’s distress or failure is more likely to damage the global economy or financial markets if its activities comprise a large share of global activity.
  • ts failure is therefore more likely to damage confidence in the global financial system
  • Interconnectedness
  • contagion in respect of other institutions depending on the network of contractual obligations in which it operates.
  • Intra-financial system assets.
  • Intra-financial system liabilities
  • Wholesale funding ratio.
  • Substitutability.
  • systemic impact of a bank’s distress or failure is expected to be negatively related to the substitutability of its services.
  • lack of realistic alternatives to a major business line
  • Assets under custody
  • disrupt the operation of financial market
  • Payments cleared and settled through payment systems
  • these institutions and customers may be unable to process payments immediately, affecting their liquidity.
  • Value of underwritten transactions in debt and equity markets
  • impede new securities issuance.
  • Complexity.
  • failure is likely to be greater, the more complex its business, structure, and operations are.
  • Notional value of OTC derivatives.
  • Level 3 assets.
  • Trading book value and “available for sale” value.
  • The BCBS provides some opportunity for individual supervisors of banks to make adjustments to a bank's G-SIB criteria determined by reference to the above criteria but states that it believes the bar for any such adjustment should be high, and it only expects such adjustments in exceptional cases.
  • continuing review of banks against the relevant indicators,
  • not proposing to develop a fixed list of G-SIBs. Banks could therefore migrate in and out of SIB status over time
  • G-SIBs, each bank will grouped into a category of systemic importance based on its score under the indicator based test specified above.
  • there will be 28 G-SIBs
  • Assessment Methodology
  • “indicator based measurement approach”
  • Each of these indicators is given a 20% weighting and, as specified below, most of the indicators are made up of two or more sub-indicators
  • Each indicator’s score is then aggregated.
  • Agency problem
  • Shareholder discipline.
  • Contingent capital holder discipline.
  • Market information.
  • Cost effectiveness.
  • Trigger failure.
  • Cost effectiveness.
  • Complexity.
  • Adverse signalling.
  • Negative shareholder incentives.
  • contingent capital should not be capable of meeting the additional loss absorbency requirement for G-SIBs
  • for consideration at the next G-20 meeting in November 2011, and it is expected they will be endorsed at such meeting.
  • 28 banks will initially be specified as G-SIBs
  • The effect on such banks will, however, be significant
  • the common equity requirement for the largest global banks increasing from the current 2% of risk weighted assets to 9.5% (and potentially 10.5%)
  • G-SIBs will have some time to plan for the new loss absorbency requirement. The BCBS is proposing that the requirement will be phased in at the same time as the new capital conservation and countercyclical buffers between 1 January 2016, becoming fully effective at the start of 2019
  • the minimum “cut-off score” in relation to which banks will be regarded as G-SIBs will be set by 1 January 2014, and national jurisdictions will be expected to incorporate the new rules into legislation by 1 January 2015.
  • new Basel III framework at the end of 2010, the BCBS mandated all banks to hold significantly more capital than is currently the case as well as introducing new leverage and liquidity ratios
  • The Basel III rules apply to all banks. In addition, the FSB and the BCBS have been considering additional rules to apply to the largest global banks to deal with concerns that such banks are regarded as too big to fail
  • Basel Committee on Banking Supervision (“BCBS”) and the Financial Stability Board (“FSB”) published two papers relating to entities regarded as globally systemic important financial institutions (“G-SIFIs”)
  • Additional Loss Absorbency Requirement
  • Background
  • y.   Cons
  • : Pros
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