When it comes to global banks, size matters Gillian Tett
Too Big To Fail, Politically Simon Johnson. Every reform-minded economist hates the Obama white paper. Bankers seems pretty happy, though.
Volcker: Sure, don’t regulate the hedge funds much. But don’t let them mooch off the safety net, either. Robert Johnson
Roubini: New Regulations "Go in the Right Direction," But Not Far Enough Tech Ticker. Roubini is so diplomatic when it comes to Summers and Geithner.
The lessons of 1937 Christina Romer
Hoover or Roosevelt? Obama gets comparison to past presidents New Deal 2.0
US Says Seized ‘Treasury Bonds’ Are Not The Real Thing WSJ
Equity Compensation for Long-Term Results WSJ
Homosexual behaviour widespread in animals according to new study Telegraph
After Pilot Dies, Jet Lands Safely in Newark NY Times
Martin Wolf Speak, You Listen CJR. This is a derivative of the Great Depression II meme which Martin Wolf picked up on.
Toxic Chemicals – New Toxic Chemicals to Avoid Daily Green
Outsider in the world of economics takes a dim view of ‘rotten’ banks Irish Independent. Interview with Jamie Galbraith.
The next big investment bubble Money Week
If FedEx is losing money, you know the economy is in bad shape – Credit Writedowns
Polls find rising concern with Obama on key issues Reuters. Is the honeymoon over?
La mora bancaria alcanza el 4,420% en abril, la ms alta desde agosto de 1996 Finanzas (Spain). Loan delinquency in Spain is at a 13 year high and still increasing. Because Spanish loans are not marked to market more of the losses lie ahead of us than in the U.S.
Antidote du Jour:
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Edward,
mortgage loan delinquency:
– US, Q1 2009: 5.22%
– Spain, March 2009: 2.8%
The Spanish (Continental European) mortgage system is different from the US-UK system. If you don't pay your mortgage, not only do you lose your house, but part of your income, too, by a judge's order.
The only ways for a Spaniard not to pay their mortgage would be: 1) working indefinitely in the informal sector; 2) immigration out of Europe. Both options mean less income and a far lower quality of life, anyway, than paying their mortages.
This means mortgage delinquency leads to foreclosure in the US, but it is mostly a delay in payment in Spain.
Spaniards will suffer. Not so their banking system (which, paradoxically, may mean Spaniards will not suffer all in all as much as with an Anglo-Saxon system).
Another piece of data: mortgage debt as %GDP (2006, couldn't find for later years):
Denmark, 98.1%
UK, 82.8%
US, 79%
Netherlands, 72.6%
Spain, 56.1%
Germany, 42.3%
Spain is closer to Germany than to mortgage-bubbled UK and US. This is a remarkable feat since homeownership in Spain is around 90% compared to barely 50% in Germany.
Spaniards take a mortgage to buy their homes, but they never, ever refinance for consumption. (OK, I've met a couple of financially irresponsible exceptions, but it never was even a big minority).
Article: "Banking Problems In Southern Europe Send The Whole World Running For Cover"
http://www.rgemonitor.com/financemarkets-monitor/257100/banking_problems_in_southern_europe_send_the_whole_world_running_for_cover
Good update on Europe's weak points.
Diego,
Do you know if secrutization of Spanish mortgages (i.e. package mortgages and sell them off to investors) was popular?
Sivaram,
no, securitization in the US sense (MBS) wasn't popular, because the originator had to have a big stake on mortgages and the Bank of Spain forbade putting MBS on off-balance sheets.
Covered bonds grew increasingly popular, but they were backed by all mortgages issued by a bank (not only a subset, such as subprime or Alt-A), and sometimes even by all mortgages issued by a group of banks.
You can learn more here:
http://www.econweekly.com/2008/03/spains-mortgage-funding-is-different.html
Ever since the first goofy comparisons of Obama to FDR, I have been saying the apter comparison is to Hoover. We need fresh thinking, solutions that work, instead we are getting inertia.
As for Volcker, he should have gone further and said neither banks nor pension funds should get involved with hedge funds and high risk speculative investing.
Finally, there seems to be an unstated rule among economists not to criticize anyone who helped them earlier in their career. Roubini goes soft on Summers just like you will never catch Krugman directly criticizing Bernanke. This may be very gentlemanly but it really hits their credibility.