Posts filed under “Think Tank”
To quantify the fall off in volume seen over the past week of trading, assuming current trends persist to day’s end, today will be the 4th day in a row of total consolidated NYSE volume below 5b shares for the first time since mid July. I’m not going to give a technical prediction based on this but the drop off in volume is likely due to Q3 earnings season being basically over, the economic calendar quiet this week, a greater focus on risk control (sometimes by doing less) as we are close to finishing up a good year in stock performance, in nominal terms and a general uncertainty about the state of the world with sluggish economic fundamentals on one hand but free money falling from the sky on the other.
The Federal Reserve’s Lame Attempt To Defend Itself Against Bubble Creation The Financial Times – Frederic Mishkin: Not all bubbles present a risk to the economy There is increasing concern that we may be experiencing another round of asset-price bubbles that could pose great danger to the economy. Does this danger provide a case for…Read More
~~~ The Financial Commentator: Special Update November 5, 2009 As promised in the October 18, 2009 letter, this is a Special Update for gold and the gold stocks. As gold broke out of the triangle discussed in the August letter in early September, it made progressive new highs above the May 2009 peak in September,…Read More
Category: Think Tank
If you sell it, will they come? So far, yes with respect to the ability of the US Treasury to sell debt to fund the ever growing deficits of the US government. With continued falls in the US$, coincident rise in gold and growing inflation expectations, today’s 10 year auction and Thursday’s 30 year will…Read More
Governor Daniel K. Tarullo
At the Money Marketeers of New York University, New York, New York
November 9, 2009
Systemic crises typically reveal failures across the financial system. The crisis that unfolded over the past two years is no exception, with fundamental problems apparent in both the private and public sectors. There were massive failures of risk management in many financial firms and serious deficiencies in government regulation of financial institutions and markets. But the breadth and depth of the financial breakdown suggest that it has much deeper roots. In many respects, this crisis was the culmination of changes in both the organization and regulation of financial markets that began in the 1970s. An appropriately directed response must build on an understanding of this history.
In my remarks this evening I will begin by reviewing the origins of the crisis, as a prelude to discussion of the elements of a reform agenda that I believe to be reasonably clearly established. I will close with some thoughts on the very important question of whether additional regulatory methods will be necessary to provide the foundation for a stable and efficient financial system.1
The Origins of the Crisis
Shortly after President Franklin Roosevelt’s inauguration in 1933, Congress enacted sweeping new measures that would define financial regulation for decades. The creation of the Federal Deposit Insurance Corporation (FDIC) countered the problem of bank runs and panics by insuring the bank accounts of the vast majority of Americans. Along with preexisting restrictions in the National Banking Act and state laws, the Glass-Steagall Act established a regulatory system that largely confined commercial banks to traditional lending activities within a circumscribed geographic area. At the same time, the Securities Act of 1933 and the Securities Exchange Act of 1934 brought increased transparency and accountability to the trading and other capital market activities that were now essentially separated from commercial banking.
This regulatory approach fostered a commercial banking system that was, for the better part of 40 years, quite stable and reasonably profitable, though not particularly innovative in meeting the needs of depositors and borrowers. The new FDIC insurance, the 1933 statutory prohibition of interest payments on demand deposits, and the Fed’s Regulation Q upper limit on interest rates paid on savings deposits had together suppressed competition for deposits among banks and made retail deposits a highly stable source of relatively attractive financing.
The turbulent macroeconomic developments of the 1970s, along with technological and business innovations, helped produce an increasingly tight squeeze on the traditional commercial banking business model. The squeeze came from both the liability side, in the form of more attractive savings vehicles such as money market funds, and from the asset side, with the growth of public capital markets and international competition. The large commercial banking industry that saw its lending to large and medium-sized corporations threatened by their increasing access to public capital markets sought removal or relaxation of the regulations that confined bank activities, affiliations, and geographic reach. While supervisors differed with banks on some important particulars, they were sympathetic to this industry request, in part because of the potential threat to the viability of the traditional commercial banking system.
With the FOMC last Wednesday reiterating the continuation of their extraordinary accommodation, followed by the G20 over the weekend saying fiscal policy will also stay the same having lit fire again to the anti US$/reflation trade today, the fed funds futures can help us quantify the markets belief of what is “exceptionally low” and how…Read More
On the heels of the status quo G20 meeting over the weekend that has hit the US$ today and buoyed commodities, the implied inflation rate in the 5 year TIPS is rising 8 bps from Friday to 1.86% (vs 1.72% one week ago), matching the highest level since Sept 1st ’08 and expectations 10 years…Read More
These are the papers presented at the conference discussed earlier: Session 1: Services Offshoring Chair: Kenneth Ryder (NAPA) “Measuring the Impact of Trade in Services: Prospects and Challenges,” J. Bradford Jensen (Georgetown University and Peterson Institute for International Economics) “Measuring Success in the Global Economy: International Trade, Industrial Upgrading, and Business Function Outsourcing in Global…Read More
Dan Greenhaus is at the Equity Strategy Group at Miller Tabak + Co. where he covers markets and portfolio theory. He has contributed several chapters to Investing From the Top Down: A Macro Approach to Capital Markets (by Anthony Crescenzi). ~~~ We have been asserting for some time now that the issue for the market…Read More
Category: Think Tank
“We agreed to maintain support for the recovery until it is assured…We are not out of the woods yet,” said the UK Chancellor of the Exchequer Darling at the weekend’s G20 meeting. This continued green light on massive monetary and fiscal stimulus and no commentary about the US$ has the dollar index falling to within…Read More