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Perhaps the Fed’s hyper-expanded balance sheet gamble and credit allocation will be judged by future historians as a success. This is a matter of uncertainty. I’d guess the chances are less than 50 percent. On the other side, after the asset inflations end, I’d guess is that there is a greater than 50 percent chance that the historians of the future will give the post-crisis Fed a Bronx cheer.
When faced with uncertainty, we instinctively find comfort when our opinions and actions agree with those we respect. In short, a prudent banker is one who goes broke when everybody else goes broke! As long as prudence in practice means doing what other people do, both as bankers and regulators, periodic crises are inevitable.
The list of the 25 biggest S&Ls in America in 1983, just three decades ago, contains many names which were famous in housing finance circles in those days. How many do you think still exist? Make your guess before you read the answer.
There is nothing in the least surprising about the failure and bailout of Banco Espírito Santo in Portugal. Anyone who has seen a few financial crises knows that one of their typical occurrences is for central banks and governments to offer assurances that things are all right, when in fact a disaster is approaching.
The power of bank living wills lies beyond what's written down on paper. Living wills are a gateway for regulators to change the company itself. If companies' living wills are not to regulators' liking, regulators can require the institutions to restructure, raise capital, reduce leverage, divest or downsize.
The Dodd-Frank Act has failed to achieve its stated goals. Instead, evidence suggests that Dodd-Frank has reinforced investor’s perceptions that the largest financial institutions enjoy an extended government safety net. Rather than ending too-big-to-fail, Dodd-Frank’s provisions create new uncertainties around the resolution process for large financial institutions.
As the great economist Joseph Schumpeter rightly said, “Capitalism not only never is, but never can be, stationary.” Of the ten largest banks in 1981, only two still exist as independent companies.
The Dodd-Frank Act (DFA) uses the phrase “systemic risk” 39 times without defining it. Because the term is ambiguous, the law allows the regulatory agencies wide discretion. The DFA directs agencies to draft and implement rules to control and minimize “systemic risk” without requiring the agencies to identify specifically what they are attempting to control or minimize.
Please join us for the third-annual Walter Berns Constitution Day Lecture as James Ceasar, Harry F. Byrd Professor of Politics at the University of Virginia, explores some of the Constitution’s most significant contributions to political theory, focusing on themes that have been largely unexamined in current scholarship.
We invite you to join us for this year’s international conference on housing risk — cosponsored by the Collateral Risk Network and AEI International Center on Housing Risk — which will focus on new mortgage and collateral risk measures and their applications.
Please join us as Speaker John Boehner (R-OH) delivers his five-point policy vision to reset America’s economy.
Please join us as a panel of distinguished experts explore the implications of the report and the consumer role in shaping the future of Medicare.