A Regulatory Pendulum

By | 2017-07-17T12:21:28+00:00 February 21st, 2017|Global Market Update|

How much regulation do we need? Photo: Arnaud Clerget. Source: Wikipedia After the financial crisis, Congress enacted new regulations on the financial system. The concern was that big banks had gotten us into an awful mess through their reckless lending, so we needed to put new rules in place to make sure they never did that again. Dodd-Frank has been in effect for over six years now, and it’s reasonable to ask if anything has changed. The logic behind most regulation is simple: our [...]

The Dangers of Success

By | 2017-07-17T12:21:33+00:00 December 21st, 2016|Global Market Update|

The Dangers of Success What happened to “The Maestro”? Public Domain. Source: IMF Alan Greenspan chaired the Federal Reserve from 1987 to 2006. He’s a fascinating character: a mostly self-taught economist, a jazz clarinet player, a policy advisor and skilled political operator. He understood how political power ebbs and flows, and used that understanding to direct Fed policy for almost 30 years—an eternity in Washington. His greatest success came when he successfully intuited that productivity was growing much faster in the mid-‘90s than initially [...]

700 Billion Little Birds

By | 2017-07-17T12:21:41+00:00 October 4th, 2016|Global Market Update|

Could $700 billion create some moral challenges? Lady Justice. Source: Wikipedia In the midst of the financial crisis, Congress passed the TARP program—originally designed to buy troubled assets from banks, but actually used to provide additional capital to the banks. It didn’t buy CDOs-squared and mortgage-backed securities backed by NINJA-loans—mortgages to people with no income, no job, and no assets. Instead, the TARP program mostly bought preferred shares issued by banks, injecting capital directly into the banking system. Not every bank took TARP money. [...]

Reforming Money, Tightening Money

By | 2017-07-17T12:21:46+00:00 August 23rd, 2016|Global Market Update|

Are money markets doing the Fed’s job? Photo: Jon Sullivan. Source: Public Domain Images The Fed is in Jackson Hole this week, discussing how to design a monetary policy framework that enhances the global economy. Luminaries from all over the world will be there—from other global central bank leaders to politicians to academics. On Friday, Janet Yellen will speak, and she is expected to offer some hints as to how she—and by extension, the rest of the Fed—sees the economy, and where Fed policy [...]

A Few Quick Thoughts …

By | 2017-07-17T12:21:55+00:00 June 27th, 2016|Global Market Update|

In no particular order: Source: Econlib Scottish independence: the conventional wisdom is that Scotland will now have a referendum and vote to leave the UK and re-join the EU—even the Euro-zone. This will be messy. During the last Scottish independence vote, they wanted to immediately adopt the Euro, but Brussels said the Scots would have to apply like any other nation—a process that would take years. A new independence referendum must be authorized by the British—not Scottish—Parliament. They’re going to be pretty busy. I [...]

Bootleggers and Bankers

By | 2017-07-17T12:22:04+00:00 April 25th, 2016|Global Market Update|

Are banks out of control? Photo: Nightscream. Source: Wikimedia Many people are still hurting as a result the Financial Crisis. And there’s a lot to be upset about. By some measures upwards of $5 trillion in wealth was destroyed. The crisis triggered the Great Recession of 2008-9, and led to government bailouts and fiscal stimulus packages around the world. At the heart of the crisis was our overly complex banking system. Fundamentally, banking is pretty simple: move money from people who have it to [...]

Lehman Lessons

By | 2017-07-17T12:22:27+00:00 September 16th, 2015|Global Market Update|

Should the Government have let Lehman fail? Photo: David Shankbone. Source: Wikipedia CC BY-SA 3.0 Seven years ago Lehman Brothers filed for protection from creditors under Chapter 11 of the bankruptcy code. A last-minute deal to save the global investment bank had fallen through. In the immediate aftermath, Lehman bonds traded at 60—then 30—cents on the dollar; Barclays and Nomura purchased Lehman’s North American and global franchises, respectively. Thousands of employees packed up their desks and started looking for work. The plummeting value of [...]

From Russia, With Love

By | 2017-07-17T12:23:06+00:00 January 29th, 2015|Global Market Update|

Is Russia on the brink? Source: Jeremy Nichol Ever since oil prices collapsed folks have wondered when Russia would follow. After all, falling oil prices have led to a fall in the Ruble. In 1998, the Ruble’s collapse caused a financial crisis. Isn’t another one just around the corner? […]

P.S: You’re Broke

By | 2017-07-17T12:34:14+00:00 October 1st, 2014|Global Market Update|

Well that didn’t take long. Source: Heritage.org On Tuesday a Federal judge dismissed a lawsuit brought against the government and some officials for sending Fannie Mae’s and Freddie Mac’s profits back to the Treasury Department. The shareholders’ argument was that the mortgage giants had paid back the money the government gave them during the crisis. So now it was time for them to start getting dividends again. […]

Banking on Change (Part 2)

By | 2017-07-17T12:34:15+00:00 September 9th, 2014|Global Market Update|

What’s changing for banks? The easiest changes to see are regulatory. Regulators have massive influence on how banks do business. From standards on loans to borrowing to capital, the overseers have been raising the bar. And it needed to be raised. One of the causes of the Financial Crisis was lenient regulation. Regulators assumed that market discipline would keep the biggest institutions in line—that firms that mark-to-market every day didn’t need as much of a safety net. Well that didn’t work out so well. [...]