Posts filed under “Bailouts”

Can the Fed Save the (Financial) World?

Roger Altman, former deputy secretary of the Treasury, thinks so:

"Today, regulatory authority is divided among the Federal Reserve,
the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, the Office of Federal
Housing Enterprise Oversight, the Securities and Exchange Commission,
the Commodity Futures Trading Commission, state banking regulators and
state insurance regulators. That’s too many players.

What’s more, this balkanized system supervises only half of the
relevant financial universe. It neglects investment banks, hedge funds
and institutions like mortgage companies that issue asset-backed
securities. The assets of these unregulated entities total about $10
trillion — which is the same amount we see on the regulated side.

The unregulated institutions pose particular risks because they are highly leveraged and financed primarily through short-term money markets rather than customer deposits. And unlike big banks, many of them do not disclose their finances to the public."

If taxpayers are going to be on the hook for the bailouts, than we should be able to set the parameters of what is allowable in terms of capital minimums and leverage.

Yes, this is regulation. No, this is not a Free Market policy. But neither was the bailout of Bear Stearns, nor the Housing Bailout, nor the imminent bailout of Fannie and Freddie and maybe even FDIC.

"The Bear Stearns case vividly illustrated the dangers that come with lack of regulation and transparency. Although Bear Stearns carried $300 billion in liabilities, it was not supervised by the Fed. When it began to fail, the Fed correctly judged that the system might not withstand the shock and arranged a rescue. But suddenly, the Fed was standing behind both the larger banks it regulates and the major investment banks it does not. This cannot continue.

The next president must first create a single framework for the major financial borrowers, administered by the Federal Reserve alone. This wider regulatory umbrella should be more conservative. In particular, the minimum levels of capital and liquidity that financial institutions are required to maintain should be higher than they have been in recent years. And the institutions should put in place better and more detailed systems for reporting — internally as well as to regulators and the public — on all the risks they are taking."

Beware the false dichotomy that many pundits present when it comes to these issues. The choice isn’t between regulation and no regulation — its between Federal Bailouts or no Federal Bailouts.

You want the bailout? You take the regulation with it. Otherwise, don’t ask the Fed or Treasury or Congress for help, you disingenuous phony free market hypocrites . . .


How the Fed Can Fix the World
NYT, September 2, 2008

Category: Bailouts, Corporate Management, Credit, Derivatives, Federal Reserve, Taxes and Policy

Fannie + Freddie = Frannie ?

Category: Bailouts, Credit, M&A, Real Estate

The Federal Reserve & Moral Hazard

Harvey Rosenblum, 38 Year veteran of the Fed, and now head of Research of the Dallas Fed.

click for video


The Money Quote is:  The Job of Federal Reserve of the is to create Moral Hazard

fascinating stuff . . .

Category: Bailouts, Credit, Economy, Federal Reserve, Video

The Big Freddie Mac

Category: Bailouts, Credit, Inflation

His Name is Mudd

Category: Bailouts, Corporate Management, Credit, Legal, Real Estate, Valuation

Category: Bailouts, Credit, Taxes and Policy

Bernanke Bailout

Category: Bailouts, Economy

China’s View of US SubPrime Issues

Category: Bailouts, Credit, Derivatives, Economy, Real Estate

Fannie & Freddie & Peter Pan Paulson

Category: Bailouts, Corporate Management, Credit, Real Estate

Protest at the Fed

While we are sitting around waiting for the widely anticipated stand pat 2:15 FOMC Fed statement, here are some interesting photos of a protest at last months meeting:




Full set of photos here

Hat tip: Cunning Realist


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Category: Bailouts, Federal Reserve, Psychology