Tag: Banks

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Barred access to their own bank accounts since April, people in Zhengzhoi, China staged a protest on Sunday. The footage shown during this interview is out of chronological order, showing the violent breakup of the protest by plainclothes government agents first (including one guy in a Yankees jersey), and footage of how it began as […]

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Join Jim and Greg as they welcome the surprising analysis from NBC’s Chuck Todd that Pres. Biden had a major credibility problem on many different issues. They also smile at reports that Democrats fear they won’t be able to pass the $3.5 trillion monstrosity in its entirety or maybe at all, and they point out just one truly absurd provision in the bill that would impact all of us. And they highlight White House Press Secretary Jen Psaki for her ridiculous contention that illegal immigrants are not planning to stay long in the United States.

In this AEI Events Podcast, AEI’s Peter J. Wallison welcomes Sanjai Bhagat of the University of Colorado Leeds School of Business to discuss Dr. Bhagat’s new book, Financial Crisis, Corporate Governance, and Bank Capital (Cambridge University Press, March 2017).

Dr. Bhagat emphasizes the Dodd-Frank Act’s costs to the US economy and highlights that, despite its stated intentions to eliminate “too big to fail,” investors and economic policymakers still believe that banks are still too big to fail. To address systemic risk and prevent a future financial crisis, bank executive compensation needs to be addressed. To this end, Dr. Bhagat emphasizes the importance of aligning management incentive with sound financial practices, and he suggests restructuring bank executive and director incentive program to include only restricted stock and restricted stock options with long vesting periods. He also underlines the importance of financing banks with considerably more equity. He clarifies that the 2007–08 financial crisis was not exacerbated by misalignment of corporate management incentive, but that this misalignment exacerbated the financial crisis.

In this AEI Events Podcast, a group of financial experts and historians meet to evaluate the Glass-Steagall Act and the extent to which it can address current and upcoming challenges in American finance in an event hosted by AEI’s Paul H. Kupiec. In the keynote address, Dr. Richard Sylla (New York University Stern School) points out that the real problem of the financial banks was shadow banks – not universal banks – which the Glass-Steagall Act would fail to address.

In a following panel discussion, experts assess the prospects of passing the Glass-Steagall Act, in addition to the implications for banks and their respective bank holding companies. Panelists include Martin Baily, (The Brookings Institution), Oliver Ireland (Morrison and Foerster LLP), Paul H. Kupiec (AEI), and Norbert Michel (The Heritage Foundation). The discussion is moderated by Alex J. Pollock (R Street Institute).

How to Make Banks Safer

 

wall_street_stock_exchangeEconomist and banking expert Allan Meltzer, at AEI yesterday:

My reading of the history of financial crises is that regulators lock the door against the source of the last crisis. Neither regulators nor others can foretell how the next one will develop. They completely missed the causes of the Great Depression of 1929, the Great Recession of 2008 and much in between.

With that in mind, I testified four times on Dodd-Frank. I urged less discretionary regulation with a rule for the largest banks that they be required to hold a minimum of 15% equity reserves. My proposal became the centerpiece of the bipartisan Brown-Vitter bill. It never was voted on. The large banks prefer regulation and the corrupt arrangements of the current regulatory system. This permits them to negotiate circumvention of the rules that the Fed writes. And it penalizes competitors. Current costly regulations one of the main reasons the number of small- and medium-sized banks has declined greatly.

The Unraveling

 

Day One: Woman Having Credit Card Declined

The grocery carts stopped moving, as all the customers listened in on the din from the front of the store. A young mother with three young children was furiously yelling at the check-out clerk. Apparently, the uproar occurred as the clerk would not allow the woman to take her groceries until her debit card was approved or another form of payment was provided. The young woman continued the commotion by shouting that there was money in her account and she needed the milk and food for her babies.

Will Anyone Ever Defend Banks?

 

shutterstock_168853424One of the interesting nuggets coming out of the conservative sweep in the British elections was the failure of bank-bashing by the Labour party. Labour leader Miliband, who has since resigned, was anti-bank, anti-rich, and anti-business. It failed. And while conservative leader David Cameron didn’t necessarily defend banks, he didn’t attack them either.

Now, the case for Tory economic management wasn’t bad. The London Stock Exchange has been hot as a pistol. And the British economy is growing about 2.5 to 3 percent. Not great, not awful. It was enough for a handsome Tory victory. And it may be a message to British pundits that tax-the-rich, redistributionist, bank-bashing talk is old hat. Been there. Won’t work.

But the question is, how will bank-bashing do in the U.S. election next year? It’s already coming from both sides of the aisle.

Do We No Longer Care if the Megabanks Are Too Big to Fail?

 

There’s a fantastic bit in the 1987 film Moonstruck where New York City plumbing contractor Cosmo Castorini explains the economic of his profession to a yuppie couple: 

There are three kinds of pipe. There is what you have, which is garbage and you can see where that’s gotten you. Then there’s bronze, which is very good unless something goes wrong. And something always goes wrong. And then there’s copper, which is the only pipe I use. It costs money. It costs money because it saves money.