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Posts Tagged ‘banking regulations’

New Banking Rules Have Not Hurt Jamie Dimon

Posted by Larry Doyle on June 8th, 2011 12:20 PM |

When do you know that somebody is tone deaf?

Those with any measure of ‘sense on cents’ know when an individual is tone deaf. How so?

When said individual racks up compensation in the multiple tens of millions of dollars from an industry that was bailed out by taxpayer funds and then complains about changes in regulatory oversight, you know that individual is tone deaf.

To whom do I refer? Welcome to the world of JP Morgan CEO Jamie Dimon. (more…)

Goldilocks Economy

Posted by Larry Doyle on May 8th, 2009 1:15 PM |

Will the wizards in Washington be able to recreate the Goldilocks economy, in which we can generate moderate growth with limited inflation and near full employment? Well, that economic dream is still off in the distance, but the Goldilocks analogy is appropriate. How’s that? Much like the cherished tale, the wizards are faced with three choices in virtually every situation: too much, too little, just right.

Fiscal policy
 – too much spending and/or improperly targeted spending will drive interest rates higher via massive deficits and potential hyperinflation.

 – too little spending and/or improperly targeted will not properly stimulate the economy and may lead to a bout of deflation.

 – just the right amount of spending and properly targeted will support the economy and stabilize prices.

Monetary Policy
 – too much gas on this fire will massively grow the money supply and lead to hyperinflation.

 – not enough gas or a slow delivery (the concern in Europe) will not stop the economy from sliding into a deeper recession.

 – just right will lead to support for the economy. However, our wizards must be prescient and know exactly when to turn the gas line down and then off. If this procedure is not executed with precision, our house may go up in the flames of hyperinflation. Many wise and elderly wizards, including none other than Paul Volcker, have this concern.

Regulatory  
 – overly restrictive regulations will inhibit an entrepreneurial spirit and drive business overseas.

 – ineffective, inappropriate, or insufficient regulations will lead to further moral hazards and an economic foundation akin to a pile of sand. Dare I say, our house is suffering from this problem currently.

 – just right would compel new regulators with real teeth to redraft the rules by which we play. Paul Krugman wrote “Stressing The Positive” in yesterday’s New York Time and addressed this topic. Krugman offers:

. . . what worries me most about the way policy is going isn’t any of these things. It’s my sense that the prospects for fundamental financial reform are fading.

Does anyone remember the case of H. Rodgin Cohen, a prominent New York lawyer whom The Times has described as a “Wall Street éminence grise”? He briefly made the news in March when he reportedly withdrew his name after being considered a top pick for deputy Treasury secretary.

Well, earlier this week, Mr. Cohen told an audience that the future of Wall Street won’t be very different from its recent past, declaring, “I am far from convinced there was something inherently wrong with the system.” Hey, that little thing about causing the worst global slump since the Great Depression? Never mind.

Those are frightening words. They suggest that while the Federal Reserve and the Obama administration continue to insist that they’re committed to tighter financial regulation and greater oversight, Wall Street insiders are taking the mildness of bank policy so far as a sign that they’ll soon be able to go back to playing the same games as before.

Uncle Sam’s intervention
 – too much involvement means private enterprise will either not play in our markets or charge a higher price in the form of higher interest rates (this is VERY likely to happen given the disregard for property rights and the validity of contracts).

 – too little and the economy may take another leg down in the form of a triple dip.

 – just right . . . how do we compel Uncle Sam to be a benevolent Old Man and not encroach on the principles of capitalism, free markets, and private enterprise as he tries to push forward with a massive social agenda and enormous spending plans?

The trail on which we are proceeding will be LONG. Will we be able to find that warm home in the woods? Do we have the fortitude and courage to sacrifice as need be or do we have leaders who are blinded by ambition and agendas which will cause us to lose our way?

Bring extra supplies.   

LD

FDIC . . . For Doing It Correctly

Posted by Larry Doyle on March 19th, 2009 2:41 PM |

Sense on Cents is very judicious in selecting our Economic All-Stars (highlighted in the left sidebar). These individuals continually display a level of professionalism, maturity, consistency, and integrity which are not commonly found in our financial or political spectrum. I deeply appreciate their insights and perspectives and enjoy sharing them with our audience at Sense on Cents and No Quarter USA.

I thank Susan and Andy for tipping me off to remarks made earlier today in which Sheila Bair Says “Too Big to Fail” Strategy for Financial Institutions Must End. The administration and other political pundits  are trying to make the case that the Federal Reserve should serve as the systemic risk regulator. In my opinion, Sheila Bair should occupy that role. There is a major political battle developing over this turf.  Make no mistake that how this battle plays out will have deep and longstanding implications for our financial system as a whole and for individual consumers. (more…)






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