Bear in mind that the implosion of the 1990s stock bubble, while nasty — households took a $5 trillion hit — didn’t provoke a financial crisis. So what was different about the housing bubble that followed?
Op-Ed Columnist - Bubbles and the Banks - NYTimes.com - 0 views
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The short answer is that while the stock bubble created a lot of risk, that risk was fairly widely diffused across the economy. By contrast, the risks created by the housing bubble were strongly concentrated in the financial sector. As a result, the collapse of the housing bubble threatened to bring down the nation’s banks. And banks play a special role in the economy. If they can’t function, the wheels of commerce as a whole grind to a halt.
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Why did the bankers take on so much risk? Because it was in their self-interest to do so.
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Nouriel Roubini on on the ugly policy tradeoff facing advanced-country central bankers.... - 0 views
Rep. Brad Miller: Ain't Nobody Here But Us Honest Bankers - 0 views
ECB Resisting Calls to Cheapen Euro as Currency War Rages - SPIEGEL ONLINE - 0 views
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The central bank chief is coming under increasing pressure because he can't quite bring himself to embrace the concept of quantitative easing, the latest fashion in the world of finance. It involves central bankers engaging in the large-scale purchase of bonds issued by their governments and other securities, thereby injecting huge sums of money into the financial system. In this way, they hope to stimulate the domestic economy and keep their own currencies cheap, thereby strengthening exports.
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The country is in the process of "boldly rebuilding" monetary policy, Prime Minister Shinzo Abe declared. Indeed, the Japanese yen has lost 12 percent of its value against the dollar in the last two months.
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The US central bank, the Federal Reserve Bank, has also been printing money to a previously unimaginable extent since the financial crisis. Calling its efforts QE 1 and QE 2, the Fed has pumped more than a trillion dollars into the US economy.
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Merkel's good politics and bad economics - FT.com - 0 views
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the ECB gears up to go full throttle into a business that, according to its statutes, is verboten: buying the debt of member states.
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Of course, Mr Draghi mumbles about conditionality: cheap cash only in exchange for deficit-slashing and market reforms. Sure. And when Mr Monti and Mariano Rajoy, Spanish prime minister, instead bend to the wishes of their electorates, what then? Will Mr Draghi stop buying and let their bonds go through the floor? Of course not. You do not have to be a central banker to predict the obvious: no market pressure, no reform.
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The ECB is about to turn into a money machine, into a lender of last resort, and damn the treaties that mandate an inflation-fighting commitment to “price stability”. The magic phrase now is “capping bond yields”, meaning the ECB buys up the debt of Italy and others in order to depress their borrowing costs.
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ECB Raises Pressure on Greece - WSJ.com - 0 views
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FRANKFURT—The European Central Bank said it would reject Greek government bonds as collateral for its normal lending operations beginning Wednesday,
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Government bonds and other debt securities backed by Greece "will become for the time being ineligible for use as collateral" in the ECB's monetary policy operations, the bank said in a statement.
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Greek banks, which are largely shut out of private markets for financing, depend critically on cheap ECB loans to meet their daily funding needs. In June, Greek banks tapped the ECB and Greece's central bank for a combined €136 billion ($166 billion) in loans through normal refinancing operations and emergency credit, an amount roughly equal to two-thirds of the country's gross domestic product.
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Greek Bank Withdrawals Accelerate - WSJ.com - 0 views
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"As we approach the last few days before the elections I expect deposit withdrawals to rise further," he added. "And I wouldn't be surprised if by Friday we saw outflows of €1 billion to €1.5 billion."
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Since the start of Greece's debt crisis in late 2009, Greece's banks have lost about one-third of their deposit base as nervous savers have taken their money out of the banks and either sent it abroad, or else stashed it away for safekeeping.
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In the past two years, deposit outflows have generally averaged between €2 billion and €3 billion a month, but have spiked during periods of political uncertainty.
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Worried Banks Pose Obstacle to Forming Financial Union - NYTimes.com - 0 views
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French loans to Spanish banks plunged 34 percent in the fourth quarter of 2011 compared with the previous quarter, according to the latest data from the Bank for International Settlements.
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For Italian banks, French bankers cut their exposure by 16 percent. German banks have also been increasingly wary of their Italian and Spanish peers, reducing lending to them by about 19 percent last year
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In the last six months, as fears about Spain and Greece have intensified, Spanish and Italian banks have been by far the biggest users of the European Central Bank’s program of cut-rate, three-year loans to banks that cannot find money elsewhere.
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EUobserver / Former ECB chief blames governments for euro-crisis - 1 views
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Former ECB chief blames governments for euro-crisis
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But the 71-year-old French banker said he had warned EU governments of growing economic divergences in the euro area as far back as 2005 and that he had criticised member states, notably France and Germany, for ignoring the deficit and debt rules which underpin the common currency.
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Trichet noted that the ECB intervened on bond markets and bought up Greek debt as early as May 2010, when he was still chief and when the first-ever EU bailout was still being drafted. It interevened again in 2011 to buy Italian and Spanish debt when investors started to bet against the larger euro-states.
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