Comments on: Clinton’s apology http://blogs.reuters.com/felix-salmon/2009/05/28/clintons-apology/ A slice of lime in the soda Wed, 22 May 2013 22:47:13 +0000 hourly 1 http://wordpress.org/?v=3.4.2 By: OGT http://blogs.reuters.com/felix-salmon/2009/05/28/clintons-apology/comment-page-1/#comment-2158 OGT Fri, 29 May 2009 19:10:29 +0000 http://blogs.reuters.com/felix-salmon/2009/05/28/clintons-apology/#comment-2158 Hierarchical lender of last resort actions by the Fed are still bail outs. They've been doing them since at least the early seventies when the banks bailed out the REITS. I count it as a bailout since the banks ultimately are relying on the Fed as their backstop. It's pernicious because it's a stealth(ish) bailout that pretends to validate market actions and encourages risk taking without a transparent debate about the building underlying risks. Hierarchical lender of last resort actions by the Fed are still bail outs. They’ve been doing them since at least the early seventies when the banks bailed out the REITS. I count it as a bailout since the banks ultimately are relying on the Fed as their backstop.
It’s pernicious because it’s a stealth(ish) bailout that pretends to validate market actions and encourages risk taking without a transparent debate about the building underlying risks.

]]> By: bsetser http://blogs.reuters.com/felix-salmon/2009/05/28/clintons-apology/comment-page-1/#comment-2156 bsetser Fri, 29 May 2009 18:57:18 +0000 http://blogs.reuters.com/felix-salmon/2009/05/28/clintons-apology/#comment-2156 Felix -- after LTCM there was a lot of handwringing about highly leveraged institutions (defined in that way to draw in more than hedge funds) including several reports by what evolved into the FSF/ other int. groups. The US wasn't indifferent to those risks at the time; though the US focused on restraining the amount of leverage the banks suppplied HLIs (so called indirect regulation). But after LTCM/ Russia/ the disorderly unwinding of the yen carry trade a lot of the big hedge funds delevered on their own, which meant that the issue kind of died. It was hard to make a case that the regulators needed to do more -- and certainly hard to convince the Fed (which was much more hostile to leverage limits and the like than the Treasury) that there was a need to do more. Tis true that there wasn't a push to do more on derivatives. But it isn't fair to say the Rubin/ Summers Treasury wasn't concerned about the level of leverage in the system. They were. And after LTCM, the amount of leverage in the hedge fund world went down for a while by almost all measures. The problem was that no one did much when it started to creep back up in this decade, as a temporary deleveraging effectively substituted for more permanent changes. Felix — after LTCM there was a lot of handwringing about highly leveraged institutions (defined in that way to draw in more than hedge funds) including several reports by what evolved into the FSF/ other int. groups. The US wasn’t indifferent to those risks at the time; though the US focused on restraining the amount of leverage the banks suppplied HLIs (so called indirect regulation). But after LTCM/ Russia/ the disorderly unwinding of the yen carry trade a lot of the big hedge funds delevered on their own, which meant that the issue kind of died. It was hard to make a case that the regulators needed to do more — and certainly hard to convince the Fed (which was much more hostile to leverage limits and the like than the Treasury) that there was a need to do more.

Tis true that there wasn’t a push to do more on derivatives. But it isn’t fair to say the Rubin/ Summers Treasury wasn’t concerned about the level of leverage in the system. They were. And after LTCM, the amount of leverage in the hedge fund world went down for a while by almost all measures. The problem was that no one did much when it started to creep back up in this decade, as a temporary deleveraging effectively substituted for more permanent changes.

]]> By: Unsympathetic http://blogs.reuters.com/felix-salmon/2009/05/28/clintons-apology/comment-page-1/#comment-2147 Unsympathetic Fri, 29 May 2009 14:01:27 +0000 http://blogs.reuters.com/felix-salmon/2009/05/28/clintons-apology/#comment-2147 Felix, I don't think they ever will apologize. The current crisis is not a bug; it's a known and planned-for feature of the monetary system they designed. Felix, I don’t think they ever will apologize. The current crisis is not a bug; it’s a known and planned-for feature of the monetary system they designed.

]]> By: zach http://blogs.reuters.com/felix-salmon/2009/05/28/clintons-apology/comment-page-1/#comment-2133 zach Thu, 28 May 2009 20:38:20 +0000 http://blogs.reuters.com/felix-salmon/2009/05/28/clintons-apology/#comment-2133 Rubin will say that when he's done counting his money. Rubin will say that when he’s done counting his money.

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