DOCSLIB.ORG

Summary of Preliminary Recomendations (Phase III)

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Summary of Preliminary Recomendations (Phase III) Financing Failure Vern McKinley American Enterprise Institute April 16, 2012 To start…. Anticipated Question • We are in 2012 and the bailouts were in 2008 and 2009. • A number of books came out in 2009 and 2010 • Why did it take so long for you to put together a book on the bailouts? Our Government (FDIC) Would Not Cooperate Our Government (Fed) Would Not Cooperate (Cont..) Our Government (FHFA) Would Not Cooperate (Cont..) Information: Narrative of Great Depression • For many years, labeled as a failing of capitalism and bailouts supposedly helped • Decades later, an alternative narrative that the government and in particular the Federal Reserve caused the crisis and made it worse as new information analyzed – Friedman and Schwartz (1963) – Rothbard (1963) Who Told the Bailout Story in 2008 and 2009? • Bailout agencies: Federal Reserve, Treasury, Federal Deposit Insurance Corp. • Politicians like ex-Senator Bennett: “Congress's finest moment.” • Cafeteria Capitalists: Picking and choosing cafeteria style when they like capitalism Common Narrative • All manner of terrible consequences for Main Street flowed from large failure • Interventions by the Federal Reserve, Treasury, FDIC saved us from another Depression • Challenges faced by Federal Reserve, Treasury, FDIC were unprecedented Early Books on the Financial Crisis • Too Big to Fail (2009), Andrew Ross Sorkin, New York Times • In Fed We Trust (2009), David Wessel, Wall Street Journal • By necessity, largely accepted the narrative of the agencies, politicians and cafeteria capitalists Examples of New Information • Secretary Paulson’s book (February 2010) • Lehman Examiner’s Report (March 2010) • GAO Report on FDIC Systemic Risk Exception (April 2010) • Congressional Oversight Panel AIG (June 2010) • Financial Crisis Inquiry Commission (September 2010 to February 2011) • McKinley v. FDIC (September 2010) • McKinley v. Board of Governors (November 2010) New Information (Cont.) • Dodd-Frank Sec. 1109 mandated disclosures (December 2010) • SIGTARP Citigroup report (January 2011) • McKinley v. FDIC II (February 2011) • Bloomberg Supreme Court case (March 2011) • GAO Report on Federal Reserve interventions (July 2011) • McKinley v. FHFA (September 2011) Themes Throughout History--Quotes • Nothing new under the sun • Fly by the seat of your pants: to proceed or work by feel or instinct without formal guidelines or experience • Story of Chicken Little and stories by regulators, financial institutions Systemic Risk/Contagion/ Domino Theory • Contagion—idea that if one large bank failure is allowed to happen, will have a cascade of financial institution failures (good and bad). • Argue this adversely impacts the entire economy (Main Street), not just financial institutions • Bear Stearns case, Federal Reserve used ‘contagion’ and FOIA request for details on expected contagion. Knickerbocker Trust (1907) • Bank of United States (1930) Franklin National Bank (1974) Franklin National Fizzles Out “The entire financial world can breathe more easily, not only in this country but abroad.” --Arthur Burns, Chairman of the Federal Reserve Source: Time Magazine, October 21, 1974 Domino Theory History Repeats • 1907 Knickerbocker Trust—concerns regarding failure • 1930 Bank of United States-10 banks in NY • 1975 Franklin National Bank-disruption in NY and international money markets • 1980 First Pennsylvania--touch off a crisis in confidence that would snowball into other bank failures in the US and abroad • 1984 Continental Illinois—66 banks failed, 113 at risk • 1998 Long Term Capital Management—disorderly fire- sale liquidation following a set of cascading cross defaults Chicken Little Stories • Story of Chicken Little – Acorn on the head – Panic and misdiagnosed the situation – Imagined harm that wasn’t there – Also spread panic to others • Notion of promoting financial stability by telling stories about how inherently unstable the financial system is Carrying on the Tradition • Fed Governor Kroszner (Bear): “I think that it is not just the direct exposure to Bear Stearns but the turmoil that this could cause in the entire credit default swaps market.” • Chairman Bernanke (Fannie and Freddie): “…the catastrophe that would occur if we did not take these actions.” • Timothy Geithner (AIG): “If you default on those commitments, then you will end up defaulting on all commitments and the firm will come collapsing down and fail.” Carrying on the Tradition (cont.) • Neel Kashkari (Washington Mutual): “We were saying that’s great, we can all be tough, and we can be so tough that we plunge the financial system into the Great Depression.” • FDIC Memo (Wachovia): “…failure of Wachovia would lead investors to doubt the financial strength of other institutions.” • Jim Wilkinson (TARP): “This is only going to work if you scare the sh** out of them.” • Secretary Paulson (TARP): “This is going to be far worse than the Great Depression in the ’30s…” Carrying on the Tradition (cont.) Chairman Bernanke (Citigroup): “…a Citigroup failure had the potential to block access to ATMs and halt the issuing of paychecks by many companies and governments.” Chairman Bernanke (GW Lectures--AIG): “..failure of AIG, in our estimation, would have been basically the end.” Analysis—Seat-of-the-Pants: Bear Stearns (March 2008) • “Coryann Stefansson just called and said that this is the info (still preliminary and probably not super accurate but kind of in the ball park at least) that she has about the exposure of major banks to Bear…She also said that [REDACTED] should be on the list, but nobody could confirm it.” • “Sorry if my details are sketchy but will try to provide more substance as we get information.” • “I must say that I am not that comfortable with the accuracy, but we got the info from the teams.” • “We have pulled together the exposure #s of the [large financial institutions] to [Bear Stearns] but the information is from the last monthly reports from the firm that are prepared by the exam teams. Board staff did not go out this week for a request on more current exposure information.” • “Here is a report we received where [Bear Stearns] tried to identify the counterparties that they owed money to. The[y] claimed it was inexact (their systems are not set up to run that way), but ordinally [sic] correct. Looks like it is only derivatives. Will provide more clarity as I can.” Analysis—Seat-of-the-Pants: AIG (September 2008) • “Do you guys have an expert on AIG?” • “What do you know about AIG? Have you produced memos on them anytime recently?” • “We don't have an expert on the company, but I do believe we have done some work on their credit exposures.” • “Anyone in your group know much about AIG?” • “Given how dire the situation with AIG is, Jim and I thought we should probably follow up to get more information on their risk profile, etc. sometime tomorrow.” • “I found very little on the derivatives activities of AIG, which is frustrating. They don't seem to say much in the 10-Ks/10-Qs.” • “Can one of you guys give me a call so we can coordinate the work on AIG and hopefully reduce overlap?” • “Sorry.....need to get an understanding of lehman bros exposures at the firm and aig......without going to the firm.....anychance u all have reports lying around.” What Documents Show—Speculation • Bear Stearns—LFIs and CDS market (Fed) • Fannie and Freddie—choice of conservatorship over receivership (FHFA) • Lehman—detected early, insolvent, bailout? • AIG—counterparty analysis, no connection between failure and consequences, likely insolvent (Fed) • Wachovia—very general analysis, speculation, 30 minute meeting (FDIC) • Citigroup—general analysis, speculation (FDIC) Common Sense • John Stewart (Daily Show: January 2010): “I’m not an economist, but these are some fragile f***ing businesses…what, are our banks made of balsa wood held together by baby tears?” • Emerging market economies have fragile financial systems. • US financial system is not so fragile. Were We Saved From Another Great Depression? • Not the objective of the Federal Reserve, but maintaining “maximum employment.” • McKinley’s rule: Based on economic cycle the past 100 years in the US, deeper the financial crisis/recession, the greater the number and seriousness of policy screw- ups in Washington (primarily the Fed). A Final Notable Quote • “[The Federal Reserve System] blames all problems on external influences beyond its control and takes credit for any and all favorable occurrences. It thereby continues to promote the myth that the private economy is unstable, while its behavior continues to document the reality that government is today the major source of economic instability.” Dodd-Frank • Phases—denial, acceptance/panic, bailout, reform legislation • Two parts to Dodd-Frank re: bailouts – “Put a stop to taxpayer bailouts once and for all” – Financial Stability Oversight Council (FSOC) • What do we do now? Follow Up • www.independent.org • www.amazon.com • www.scribd.com/vernmckinley (over 5000 pages of documents from litigation and FOIA requests, including emails, minutes and memos) • http://www.judicialwatch.org/blog/categor y/financial-crisis/ • [email protected] .
Load more

Recommended publications
  • 16% in 2017, Says Sheikh Ahmed Atar’S Foreign Trade Has Shown Quired Licenses, Which Only Require the Remarkable Growth, Increas- Approval of the Free Zones Authority
    RUSSIA VIEW | Page 3 CREDIT WOES | Page 14 Sanctions seen RBI urged to hitting growth, take steps to not rating: Fitch ease liquidity Wednesday, September 26, 2018 Moharram 16, 1440 AH QFC SUPPORT: Page 16 GULF TIMES Qatari start-ups make their presence felt at BUSINESS WEF meeting in China Foreign trade grows ‘remarkable’ 16% in 2017, says Sheikh Ahmed atar’s foreign trade has shown quired licenses, which only require the remarkable growth, increas- approval of the Free Zones Authority. Qing by 16% in 2017, said HE the Sheikh Ahmed stressed Qatar’s Minister of Economy and Commerce “fi rm commitment” to strengthening Sheikh Ahmed bin Jassim bin Moham- its position as a regional business hub, ed al-Thani. highlighting the country’s success in Qatar’s total exports also increased establishing direct trade lines with a by 18%, contributing to a total trade number of strategic partners around surplus of 49%, he said while chairing the world. a roundtable with businessmen during In this context, the Minister called a working lunch on the sidelines of Qa- upon the American business commu- tar’s participation in the 73rd session nity to benefi t from Qatar’s strategic of the United Nations General Assem- geographical location, advanced infra- bly in New York on Monday. structure and investment and legisla- Sheikh Ahmed said international tive environment. Qatar will continue trade and investment form a key part to honour its agreements and interna- of Qatar’s future growth and diversi- tional conventions. fi cation, adding that the US is one of Qatar’s private sector is also playing Qatar’s most valued and largest global an important role, the Minister said, partners.
    [Show full text]
  • Issue Full File
    JUNE 2020 JOURNAL OF EKONOMİ Volume: 02 Issue: 01 EDITOR IN CHIEF Cem Işık Faculty of Tourism Anadolu University Yunus Emre Kampüsü Tepebaşı, Eskişehir/TURKEY [email protected] ASSOCIATE EDITOR Sevilay Küçüksakarya Department of Econımics Anadolu University [email protected] REGIONAL EDITOR Ihtisham ul Haq (FAR EAST) Department of Econımics Kotah University of Science & Technology [email protected] Korhan Gökmenoğlu Karakaya (EUROPE) Department of Banking and Finance Eastern Mediterranean University [email protected] Seyi Saint Akadiri (AFRICA) Department of Econımics Eastern Mediterranean University [email protected] Tarık Doğru (AMERICA) Dedman School of Hospitality Florida State University [email protected] INTERNATIONAL EDITORIAL BOARD Dr. A. Matar Professor, Jadara Universtiy, Jordan Dr. A. K. Çelik Ardahan Universtiy, Turkey Professor, A. Aliağaoğlu Balıkesir Universtiy, Turkey Dr. Ş. A. Koç Kocaeli Universtiy, Turkey Dr. B. Okumuş Universtiy of Central Florida, USA Dr. B. Küçükaltan Trakya Universtiy, Turkey Professor, D. Altaş Marmara University, Turkey Dr. D. Özdemir Atatürk University, Turkey Dr. S. Temel Ege University, Turkey Professor, V. Bozkurt İstanbul University, Turkey D. Omotor Delta State University, Nigeria Professor, E. G. Küçükaltan Dokuz Eylül Universtiy, Turkey Dr. E. Satrovic Çağ Universtiy, Turkey Professor, E. Sırkaya-Turk South Carolina Universtiy, USA Professor, E. Erdil Middle East Technical Universtiy, Turkey Dr. E. Kasimati Bank Of Greece, Greece Dr. E. Doğan Abdullah Gül University, Turkey Professor, H. Tanrıverdi İstanbul University, Turkey Dr. U. Özcan İstanbul University, Turkey Professor, V. Ekergil Anadolu University, Turkey Professor, K. İnelmen Boğaziçi University, Turkey Dr. M. Redulescu Piteşti Universtiy, Romania Professor, M. Knezevic Libertas International Universtiy, Croatia Dr.
    [Show full text]
  • Packing the Court Without Changing the Law
    PRIVATE POLICIES AND PUBLIC POWER: WHEN BANKS ACT AS REGULATORS WITHIN A REGIME OF PRIVILEGE Brian Knight and Trace Mitchell * ABSTRACT: An emerging trend in financial services is banks’ increasingly common refusal to do business with industries for political reasons rather than for traditional business justifications. Banks’ refusals are often explained by a desire to make a difference or send a message. While this desire may not raise a concern in * The authors would like to thank Dr. Thomas M. Hoenig, Dr. Tyler Cowen, Dr. Sam Weinstein, and Dr. Walter Valdivia as well as three anonymous peer reviewers for their helpful comments. The authors would also like to thank Vera Soliman, Allen Quetone, and Joe Brunk for their very able research assistance and Peter Rivera and Kayla Lahti for their administrative assistance. In addition, the authors would like to thank Vera Soliman, Corrie Schwab, and Christina Behe for their editing assistance. Brian Knight would like to thank Thaya Knight for her constructive feedback and near-infinite patience. All errors are the fault of the authors. 66 2019] PRIVATE POLICIES AND PUBLIC POWER 67 most cases, banks are not like most other businesses. Banks enjoy an extensive regime of privilege provided by federal and state governments that includes barriers to market entry and exit, more favorable regulatory treatment than nonbank competitors in some areas, and direct and privileged access to services provided by the government. This paper asks whether this public power, granted to banks for the purposes of facilitating lawful commerce, is being misused when banks try to regulate downstream markets through withholding services and what, if anything, should be done to address these actions by banks.
    [Show full text]
  • Progressive Change Institute (Pci)
    DIRECTORY OF PUBLIC SECTOR & NONPROFIT LEADERSHIP 2020 Edition s & II PUBLISHED BY THE PROGRESSIVE CHANGE INSTITUTE (PCI) Progressive Change Institute is a 501(c)(3) charitable organization that does not engage in partisan intervention (and does not endorse, support, or oppose candidates). This guide is intended to be a non-partisan resource. In this directory, you’ll see profiles of over 700 incredible public sector leaders. These are diverse, experienced leaders who have a demonstrated commitment to the public good, and a track record of challenging corporate power and working to build a better world. This directory is a combined edition of Volume I and Volume II. Volume I is indicated in shading, and Volume II is indicated in white. The directory is an ongoing project. If you would like to nominate someone for inclusion in future editions, please contact us at: [email protected]. Over 40 organizations contributed to this directory. Special thanks to the Center for Economic and Policy Research, Family Farm Action, National Housing Resource Center, People's Action, and Public Citizen. CONTENTS AGRICULTURE CENSUS ECONOMIC POLICY EDUCATION ELECTIONS ENVIRONMENT AND ENERGY HEALTH AND HUMAN SERVICES HOUSING IMMIGRATION INTELLECTUAL PROPERTY JUSTICE LABOR OVERSIGHT PRESCRIPTION DRUGS REGULATORY AFFAIRS SOCIAL SECURITY AND MEDICARE TAX POLICY TECHNOLOGY AND COMMUNICATIONS TRADE TRANSPORTATION AGRICULTURE A-DAE ROMERO-BRIONES A-dae Romero-Briones is the Director of Native Agriculture and Food Systems at the First Nations Development Institute. She is the Co-Founder, and was Executive Director, of Cochiti Youth Experience, a nonprofit organization in Cochiti, New Mexico. She also currently serves as a Public Interest and Consumer Interest Representative on the National Organic Standards Board at the US Department of Agriculture.
    [Show full text]
  • Management, Business, and Economics to Create Opportunities for Thai Youths to Develop Their Potential
    International Journal of Sripatum University, Thailand ISSN: 2408-1914 6ULSDWXP 8QLYHUVLW\ LV RQH RI WKH ROGHVW DQG PRVW SUHVWLJLRXV SULYDWH XQLYHUVLWLHV LQ¬ %DQJNRN¬ 7KDLODQG IJMBE Dr. Sook Pookayaporn established the university in 1970 under the name of "Thai Suriya College" in order Management, Business, and Economics to create opportunities for Thai youths to develop their potential. In 1987, the college was promoted to university status by the Ministry of University Affairs, and has since been known as Sripatum University. Volume 1, Number 3, September - December 2014 ISSN: 2408-1914 "Sripatum" means the "Source of Knowledge Blooming Like a Lotus" and was graciously conferred on the FROOHJH E\ +HU 5R\DO +LJKQHVV WKH ODWH 3ULQFHVV 0RWKHU 6ULQDJDULQGUD¬ 6RPGHW 3KUD 6ULQDJDULQGUD International Journal of Management, Business, and Economics Baromarajajanan). She presided over the official opening ceremony of SPU and awarded vocational certificates to the first three graduating classes. Sripatum University is therefore one of the first five private O Corporate Governance in Islam: What Can We Learn? XQLYHUVLWLHV RI 7KDLODQG 7KH XQLYHUVLW\·V main goal is to create well-rounded students who can develop Abdelhafid Benamraoui ................................................................................................... 7 themselves to their chosen fields of study and to instill students with correct attitudes towards education so O Investigating the Performance of Islamic Mutual Funds: A Comparative Study that they are enthusiastic in
    [Show full text]
  • Building the Capacity for Business Registration Reform, by Andrei
    BUIDING THE CAPACITY FOR BUSINESS REGISTRATION REFORM Prepared by Andrei Mikhnev Small and Medium Enterprise Department World Bank Group November 2005 Table of contents Introduction ...........................................................................................................3 Executive Summary..............................................................................................4 Part One: Business Registration – International Experience ................................6 Part Two: Reforming the Business Registration .................................................16 Conclusion: Some Implications for Donor Interventions......................................22 References .........................................................................................................25 Annex: Case Studies ..........................................................................................26 Introduction This paper is prepared for the International Conference on Reforming the Business Environment: From Assessing Problems to Measuring Results. It constitutes a summary of few publications recently developed by the Small and Medium Enterprise (SME) Department of the World Bank Group. The list of publications used for this paper is enclosed in a separate section. The primary documents used for drafting this paper are the Business Registration Reform Toolkit being prepared by the team from the SME Department of the World Bank Group and Nathan Associates Inc and Business Registration Start-Up: A Concept Note. The work on the
    [Show full text]
  • Congressional Record United States of America PROCEEDINGS and DEBATES of the 106Th CONGRESS, SECOND SESSION
    E PL UR UM IB N U U S Congressional Record United States of America PROCEEDINGS AND DEBATES OF THE 106th CONGRESS, SECOND SESSION Vol. 146 WASHINGTON, THURSDAY, DECEMBER 7, 2000 No. 150 House of Representatives The House met at 2 p.m. and was I pledge allegiance to the Flag of the States Government, the Community Man- called to order by the Speaker pro tem- United States of America, and to the Repub- agement Account, and the Central Intel- pore (Mr. THORNBERRY). lic for which it stands, one nation under God, ligence Agency Retirement and Disability indivisible, with liberty and justice for all. System, and for other purposes. f f The message also announced that the DESIGNATION OF THE SPEAKER Senate recedes from its amendments MESSAGE FROM THE SENATE PRO TEMPORE numbered 2 and 4 to the bill (H.R. 3048) The SPEAKER pro tempore laid be- A message from the Senate by Mr. ``An Act to amend section 879 of title fore the House the following commu- Lundregan, one of its clerks, an- 18, United States Code, to provide nication from the Speaker: nounced that the Senate has passed clearer coverage over threats against without amendment bills of the House former Presidents and members of WASHINGTON, DC, December 7, 2000. of the following titles: their families, and for other purposes''; I hereby appoint the Honorable MAC H.R. 3514. An act to amend the Public and agrees to the amendment of the THORNBERRY to act as Speaker pro tempore Health Service Act to provide for a system House to the amendment of the Senate on this day.
    [Show full text]
  • Too-Big-To-Fail and the Financial Stability Oversight Council
    2010-2011 DEVELOPMENTS IN BANKING LAW 73 IX. Too-Big-To-Fail and the Financial Stability Oversight Council A. Introduction The 2008 financial crisis exposed the U.S. financial system’s vulnerability to “systemic risk,” the danger that the dissolution of a financial company will produce negative macro—economic effects. The crisis was unique among financial disasters because “nonbank financial companies”—securities firms and other investment banks— produced much of the systemic risk.1 Politicians feared that the failure of certain large and interconnected nonbank financial companies would bankrupt its creditors and counterparties. To preserve the stability of the financial system, the federal government “bailed out” several companies that were regarded as too-big-to-fail.2 Multi-billion dollar loans3 and coerced acquisitions4 epitomized this trend and the public outcry reached a fever pitch after Congress established the Troubled Asset Relief Program, committing $700 billion toward future bailouts.5 On July 21, 2010, President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Act seeks to reduce systemic risk by establishing the Financial 1 See Alison M. Hashmall, Note, After the Fall: A New Framework to Regulate “Too Big to Fail” Non-Bank Financial Institutions, 85 N.Y.U. L. REV. 829, 836 (2010) (“The failure of “non-bank” financial institutions, such as hedge funds and investment banks, can also pose serious systemic risk to the financial system.”). 2 See e.g. id. at 837-38 (stating that the J.P. Morgan’s acquisition of Bear Stearns “effectively protected Bear Stearns’s creditors and counterparties from losses they would have otherwise incurred in bankruptcy, which helped mitigate systemic risk.”).
    [Show full text]
  • 20420-9781484380765.Pdf
    © 2013 International Monetary Fund April 2013 IMF Country Report No. 13/101 January 2013 January 29, 2001 January 29, 2001 January 29, 2001 January 29, 2001 The Bahamas: Financial Sector Stability Assessment This Financial Sector Stability Assessment on The Bahamas was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on January 18, 2013. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of The Bahamas or the Executive Board of the IMF. The policy of publication of staff reports and other documents by the IMF allows for the deletion of market-sensitive information. Copies of this report are available to the public from International Monetary Fund Publication Services 700 19th Street, N.W. Washington, D.C. 20431 Telephone: (202) 623-7430 Telefax: (202) 623-7201 E-mail: [email protected] Internet: http://www.imf.org International Monetary Fund Washington, D.C. ©International Monetary Fund. Not for Redistribution INTERNATIONAL MONETARY FUND THE BAHAMAS Financial System Stability Assessment Prepared by the Monetary and Capital Markets and Western Hemisphere Department Departments Approved by José Viñals and Saul Lizondo January 18, 2013 This report is based on the work of an IMF Financial Sector Assessment Program (FSAP) mission to The Bahamas during July 17–31, 2012. The team comprised Elie Canetti (mission chief), Elena Loukoianova (deputy mission chief), Ivailo Arsov, Gamal El-Masry, Kalin Tintchev, Laura Valderrama, and Rodolfo Wehrhahn (all IMF), and consultants Richard Britton, Michael Deasy, Vern McKinley, José Tuya, and Christina Urias.
    [Show full text]
  • "Banks Are Special"
    AFTER THE CRISIS Revisiting the “Banks are Special” and “Safety Net” Doctrines _____________________ The Great Recession of 2007–2009 led many to question whether banks are special and deserve different financial regulation than other financial institutions. As policymakers sought to bring a swift end to the financial crisis, the safety net traditionally reserved for banks was expanded to cover a broad range of financial institutions. Following the crisis, the Dodd-Frank Act presented an opportunity to apply a more coherent approach to the question of the place of banks within the financial system. Instead, Congress further muddled the distinction between banks and other financial institutions. In a new paper for the Mercatus Center at George Mason University, author Vern McKinley argues that banks are not special and never have been special. Furthermore, banks do not deserve a bank- specific safety net. The safety net should be dramatically reduced in a much more effective manner than under Dodd-Frank. To read the paper in its entirety and learn more about its author, see “After the Crisis: Revisiting the ‘Banks are Special’ and ‘Safety Net’ Doctrines.” BACKGROUND ON THE “BANKS ARE SPECIAL” AND “SAFETY NET” DOCTRINES The primary analysis justifying the special nature of banks came from the president of the Federal Reserve Bank of Minneapolis, Gerald Corrigan, who argued in 1982 that banks are special for three reasons: (1) they offer transaction accounts, (2) they are the backup source of liquidity for all other institutions, and (3) they are the transmission belt for monetary policy. Corrigan argued that these traits qualify banks for the public safety net, which includes deposit insurance, access to the discount window for borrowings in the form of lender of last resort loans, and access to the Federal Reserve’s payment services.
    [Show full text]
  • Financial Crises and Bank Capital
    1 FINANCIAL CRISES AND BANK CAPITAL Robert Z. Aliber December 19, 2018 ABSTRACT Yogi Berra said, “If you don’t know where you are going, you will end up someplace else.” The initiatives toward more financial regulation since the global meltdown of 2008 have confused the symptoms of the crisis including the surge in bank loans to millions of sub-prime borrowers with the cause, which was the sharp increase the supply of credit in part because of the surge in cross border investment inflows to the United States and twenty other countries. The U.S. banks lent billions of dollars to sub-prime borrowers because the supply of credit was much larger than the demand from prime borrowers; the banks believed that they had a massive profit opportunity because their cost of funds was much less than the interest rates on their mortgage loans. The surge in cross border investment inflows to the United States and these other countries resulted from the large increase in the export earnings and the trade surpluses of China and of the oil exporting countries (hereafter OEC). China and the OEC could have achieved trade surpluses only if there was a comparable increase in the trade deficits of the United States and other industrial countries, which were responses to the dramatic increases in the prices of real estate and stocks and household wealth that led to the massive expansion of consumption spending and payments for imports. Great Britain, Ireland, Iceland, and Spain also had banking crises in the Autumn of 2008, Greece and Portugal had sovereign debt crises 2 fifteen months later.
    [Show full text]
  • VERN MCKINLEY, Plaintiff, V. FEDERAL HOUSING FINANCE
    Case 1:10-cv-01165-BJR Document 15 Filed 06/07/11 Page 1 of 8 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA VERN MCKINLEY, Plaintiff, v. Civil Action 10-01165 (HHK) FEDERAL HOUSING FINANCE AGENCY, Defendant. MEMORANDUM OPINION AND ORDER Plaintiff Vern McKinley brings this action against the Federal Housing Finance Authority (“FHFA”), claiming that FHFA has improperly withheld two documents that are responsive to a records request that McKinley submitted under the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552 et seq.1 McKinley argues that FHFA has incorrectly applied the deliberative- process and attorney-work-product privileges to withhold the documents. Before the Court are the parties’ cross-motions for summary judgment [## 9, 11]. Upon consideration of the motions, the oppositions thereto, and the record of this case, the Court concludes that the motions should be held in abeyance pending the Court’s in camera review of the documents. I. BACKGROUND FHFA was created in July 2008 by the Housing and Economic Recovery Act of 2008, 12 U.S.C. § 4501 et seq. Among other things, FHFA serves as the primary regulatory and oversight 1 McKinley originally sought three documents, but has dropped his claim to one of them. This opinion, however, refers to the remaining documents as “Document 2” and “Document 3” because the parties’ filings and exhibits do so. Case 1:10-cv-01165-BJR Document 15 Filed 06/07/11 Page 2 of 8 authority for the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (known respectively as Fannie Mae and Freddie Mac and together as the Enterprises).
    [Show full text]