Category Archives: Credit markets

Money as a Hierarchical System: Legal and Economic Perspectives

If you are in NYC, this event at Columbia tomorrow is a must-see! Be there or be square!

Gaius Publius: Are We Having “Bank Deregulation” Crises or “Unrestricted Capital Flow” Crises?

Yves here. For the last four years, we’ve been highlighting research that has found that high levels of international capital flows are strongly associated with frequent and severe financial crises. Gaius describes how more economists are endorsing this idea, and how the proposed trade deals, the Trans-Pacific Partnership and the US-EU trade agreement, will only make matters worse.

David Dayen: BofA/Merrill Lynch Analyst Says QE and Housing Policy Boosting Inequality

Anyone surprised by the housing recovery is simply blind to the context that the Federal Reserve has administered a bazooka full of aid and comfort over the past few years. They bought up enough mortgage bonds to force interest rates to near-record lows, boosting the fortunes of asset holders. And in so doing they made housing an attractive investment product, bringing lots of Wall Street cash into the REO-to-rental play, at least for a short while. That predictably increased demand and put housing prices on their current trajectory.

Cathy O’Neil: Short Your Kids, Go Long Your Neighbor: Betting on People Is Coming Soon

Yet another aspect of Gary Shteyngart’s dystopian fiction novel Super Sad True Love Story is coming true for reals this week.

Besides anticipating Occupy Wall Street, as well as Bloomberg’s sweep of Zuccotti Park (although getting it wrong on how utterly successful such sweeping would be), Shteyngart proposed the idea of instant, real-time and broadcast credit ratings.

David Dayen: Regulatory Apparatus To Provide Full Employment For Chroniclers of Future Bailouts, as Useless Mortgage Origination Rules Introduced

There’s no way to possibly count the various ways in which Dodd-Frank rules have been watered down, even from their already waterlogged original intent. But we got another example of it yesterday, the product of a corrupt bargain between the mortgage industry and so-called “progressive” housing groups.

Fed’s Jackson Hole Participants to QE-Exit Whacked Emerging Economies: Drop Dead

The latest Fed confab at Jackson Hole is demonstrating that central bankers were so keen to avoid taking much blame for the global financial crisis that they also failed to learn critical lessons from it. That lapse in turn is directly related to the present emerging markets upheaval that has the potential to morph into something worse.

What is Shadow Banking?

There is much confusion about what shadow banking is and why it might create systemic risks. This column presents shadow banking as ‘all financial activities, except traditional banking, which require a private or public backstop to operate’. The idea that shadow banking is something that needs a backstop changes how we think about regulation. Although it won’t be easy, regulation is possible

What Paul Krugman Should Have Learned from James Tobin but Didn’t

Paul Krugman last week wrote yet another response on the issue of “how banks work”. The problem is that Krugman’s critical source for his argument, James Tobin, in fact has taken the position the opposite of Krugman’s on monetary operations, as do central bankers.

Bill Black: The Incredible Con the Banksters Pulled on the FBI

Yves here. Bill Black continues his forensic work about the dogs that didn’t bark in both the runup to and the aftermath of the crisis.

Bad Derivatives Trades Added to Detroit’s Woes

Only now that the narrative around Detroit is pretty well established – city in long-term decline whose distress was intensified by a series of corrupt city governments, compounded by state governments that were opposed to Detroit’s interests – does an important additional factor come to light, that of derivatives losses.

Chicago CEO Club, With Rahm and Pritzkers on Board, Pushed for Chicago Bond Downgrade, Whacking Local Investors and Pension-Holders

Even more so than most cities, Chicago has had the best government money can buy. In this case, the money is willing to engage in a scorched-earth policy of crushing local investors and wrecking the city budget to achieve its end of taming unions and making Chicago even easier pickings for looting via infrastructure sales.

Quantitative Easing: Can it Be Unwound?

Yves here. This post looks at the unwinding of quantitative easing in the UK and raises some concerns.

House Republican GSE Bill Would Codify MERS, Pre-Empt Private Property Rights

The top Republican on the House Financial Services Committee has tucked a provision into his mortgage finance reform bill that would create a privately held “National Mortgage Data Repository.” The repository would basically look like MERS, the bank-owned electronic database tracking mortgage transfer. The difference is that, while MERS’ activities have drawn legal challenges across the country, the National Mortgage Data Repository would have the force of statute to carry out the exact same behavior. According to the bill text, any document arising from this repository would be seen as presumptively legal, pre-empting state and federal laws on demonstrating the right to foreclose.

Yanis Varoufakis: Europe Resorts to Authoritarianism to Paper Over Banking and Austerity Failures

Yves here. Because the European slow-motion train wreck is turning out to be particularly slow, it’s almost become background noise in the US, almost a lesser version of the now two lost decades in Japan. But what is happing in Europe is less benign and less likely to be able to continue anywhere near that long.