Richard Rosenberg has a good new paper — short, clear, summarized here — saying that the jury is very much still out on whether or not microfinance helps improve the incomes of the poor. But even if it doesn’t help the poor out of poverty, it still does a great deal of good in terms of giving them tools to deal with poverty.
Ben Sheffner makes the case today that it’s illegal for journalists to convince or induce sources to leak information, if those sources are obliged not to do so. He pegs his article off the Gawker case, but notes that the WSJ, too, might be guilty of the same tort. He concludes:
On Tuesday, the Federal Reserve released its final rule governing credit card issuers. The whole thing can be downloaded here; it’s a mere 1,155 pages long. And credit card consultant Timothy Kolk has found something rather worrying buried within it.
Let’s be clear about this: JP Morgan’s earnings today were very strong indeed. So why are the shares down? Simply because this is one of those instances where the interests of the bank and the interests of its shareholders are not perfectly aligned. Investor disappointment with the earnings is a function of the bank’s loan loss reserves, which are now a whopping $32.5 billion, or 5.5% of total assets. It’s entirely proper that JP Morgan should be treading cautiously when it comes to loan losses these days: the real economy is still very shaky. Shareholders would doubtless be much happier if the bank took a large chunk of those loan loss reserves and reclassified them as profit, but that’s not the responsible course of action.
I’ve been having an interesting email discussion with Jim Surowiecki of the New Yorker about quantifying the moral hazard trade. If big banks have lower borrowing costs than small banks, he asks, why do we automatically attribute that to moral hazard (the idea that they’re much more likely to get bailed out in extremis) rather than the simple fact that they’re less likely to default? He also makes Jamie Dimon’s point that since the debt of too-big-to-fail banks wasn’t trading at risk-free rates, there can’t have been a moral-hazard trade going on.
Paul Kiel has an important story today on something I was not aware of at all: banks converting trial loan modifications into… trial loan modifications. This violates the government’s guidelines, but it seems that the likes of Chase and Wells Fargo are doing anything they can to avoid doing what is clearly envisaged in the government plan: transforming all trial modifications to permanent modifications if the trial-mod payments are made in full and on time for three months.
Here’s one more way to look at the new bank tax, courtesy of the equity analysts at Oppenheimer & Co: it basically has the same effect on the banks hit by it as would a 15bp rise in the Fed funds rate. And much like an increase in Fed funds, it’ll simply end up getting passed through to customers in the form of higher loan rates. Which doesn’t mean that lending will fall — in fact, the Oppenheimer analysts reckon that any decrease in lending will be “barely measurable”, and will come about mainly in the form of lower demand for loans rather than less supply of credit from the banks.