Who's Afraid Of Consumer Financial Protection?
July 28, 2009
The debate over re-regulation of the financial sector has finally, and irreversibly, turned partisan. This helps define issues in ways that may be more familiar and thus easier to understand. In the blue corner we have Treasury Secretary Tim Geithner. Secretary Geithner's overall banking policy continues to be problematic, and his broader re-regulation effort is hampered by all the free passes he gave to bank CEOs earlier this year. But on consumer protection he has the right message and he delivered it forcefully to Congress last week: we need a Consumer Financial Protection Agency (CFPA) and
Secretary Geithner's China Strategy: A Viewer's Guide
July 27, 2009
On Monday and Tuesday of this week, Treasury Secretary Geithner--and Secretary of State Clinton--meet with a high-level Chinese delegation. According to official previews (i.e., the apparent contents of background briefings given to wire services), the economic topics are China's concerns about the value of the dollar (i.e., their investments in the U.S.) and the amount of debt that the U.S.
After Peak Finance
July 24, 2009
There are three kinds of "bubbles"--a term often used loosely when asset prices rise a great deal and then fall sharply, without an obvious corresponding shift in "fundamentals." A short-run bubble. Think about 17th century Dutch Tulip Mania: spectacular, probably disruptive, but not a major reason for the decline of the Netherlands as a global power. A distorting bubble. In this case, the increase in asset prices contributes to a reallocation of resources across sectors. Think of the Dot-com Bubble: fortunes were made and lost, the collapse was scary to many, and--at the end of the day--you'
Stimulus Vs. Bailouts?
July 17, 2009
Last week, the Treasury Department quietly announced it was moving ahead with plans to purchase toxic assets from banks, but in scaled-back form. To my colleague John Judis, this must have been welcome news. For months now, he and I have debated whether President Obama’s efforts would be best spent fixing the financial sector or reviving spending by consumers and businesses.
July 16, 2009
At the end of the day, CIT had nothing. Their asset quality was poor, their systemic risk implications seemed limited, Sheila Bair dug in her heels, and Jeffrey Peek (CEO) didn't have sufficiently strong connections to get her overruled. CIT had friends, but not enough--and maybe this tells us something about the shifting political sands. The Financial Services Roundtable (top financial CEOs) came out in force, the House Committee on Small Business reportedly made worried noises, and Barney Frank sounded supportive. But the American Bankers Association (the broader mass of bankers) publicly st
July 15, 2009
Two weeks ago, President Obama offered to cut several hundred billion more dollars out of the Medicare and Medicaid budget to help make room for health care reform. This sort of gesture ought to appeal to conservatives, right? Apparently not.
Obama's Tepid Support For The Consumer Protection Agency
July 13, 2009
In mid-March, the administration proposed that toxic assets could and would be safely removed from banks balance sheets. I was skeptical, and the the PPIP now seems to have slipped into irrelevance (loans; securities). But the administration still put an impressive effort into persuading independent analysts, and broader public opinion, that they should do something clearly beneficial for banks. This was "all hands on deck," and it definitely had an impact on the debate, at least for a while. Now, the administration's major remaining initiative is its version of a Financial Product Safety Comm
Blame The G8 For Energy Speculation
July 10, 2009
The G8 summit was obviously disappointing, even for those with low expectations. Usually, the substance is lacking but the public relations are well managed. This year even the messaging was messed up--they said some new things on climate change but not what we were told they could say, the food aid/development package was lamer than advertized, etc. So the whole thing looks like an expensive flop. But actually it was much worse. I've written elsewhere this week about the G8's broad decline in legitimacy and appeal relative to the G20 , and the specific pressing issue of cross-border resolutio
July 08, 2009
Congress's attempts to deal with the housing crisis this spring created surprising rifts within the financial industry, particularly between big banks and investors (at hedge funds and elsewhere).
The Case Against The G8
July 08, 2009
The G7 was originally conceived as a form of steering committee for the world economy (antecedents). Existing formal governance mechanisms, around the IMF and the UN, seemed too cumbersome (and too inclusive) during the 1970s, with the breakdown of fixed exchange rates, assorted oil shocks, and the broader shift of economic initiative towards Western Europe and Japan. And the G7 had some significant moments, particularly with regard to moving exchange rates in the 1980s. More broadly, behind the scenes, it served as a communication mechanism between the world's largest economies ("coordinatio