Felix Salmon

The limits of systemic risk regulators

What kind of information will a systemic risk regulator need from banks? Sifma has just commissioned an 86-page study on this question from Deloitte, and the conclusion, though predictable, is sobering:

The regulatory fight moves from Washington to Basel

It’s a great day: financial regulatory reform is done, and not a day too soon. The Consumer Financial Protection Bureau is coming — Ron Lieber has a great overview of how that will change the regulatory landscape — and while banks won’t have to sell their swaps desks entirely, they will need to spin them off into separately-capitalized, small-enough-to-fail subsidiaries which deal mainly on public exchanges. That’s a big and a welcome change.


“Dan Costa had a cool (and different) death grip, which can knock two signal bars off his Palm Pre” — PC Mag

God and RenTech’s black box

Does Renaissance Technologies — arguably the most successful hedge fund in the history of the world — know why it makes as much money as it does? A couple of weeks ago, I thought that it did, after reading a piece about RenTech’s Robert Frey in the FT. One of the fund’s four principles, he said, was rationality – “it can’t just be statistically valid”. You have to employ reason to identify a statistically significant but spurious pattern — which meant, I thought, that RenTech had a common-sense test: it wouldn’t enter into a strategy without having some kind of grip on why that strategy should work.

Short-seller demonization watch, Tom Matzzie edition

Tom Matzzie, for reasons which are very unclear, has decided that he’s going to wage a media campaign against Steve Eisman — and, by implication, in favor of the predatory higher-education scam artists that Eisman is looking to cut down to size. Matzzie is a credible left-wing campaigner, which makes his current bedfellows very odd ones: he’s essentially defending companies which take billions of dollars from the government and put the onus to repay that money onto “students” who are very unlikely to even graduate, let alone get the kind of job which will let them repay the loan. Eisman’s testimony to the Senate today is compelling stuff, and it’s backed up by the testimony of the OIG’s Kathleen Tighe; judging by today’s hearing, no one outside the for-profit education industry, bar Matzzie, is remotely willing to step up to defend it.

The next Icelandic banking crisis

How many times can Iceland’s banks fail? More than once, it would seem, in the wake of an important ruling by Iceland’s Supreme Court. It regards loans which were disbursed in Icelandic kronur but linked to either Swiss francs or the Japanese yen; the court has now ruled that the indexing is illegal, and that the borrowers need only to repay the loans at their initial interest rate in kronur.

Why do minimum parking requirements still exist?

Tom Vanderbilt has a great piece in Slate on the high cost of free parking:

Minimum parking requirements are based on a form of “circular logic,” in which planners estimate parking need by looking at the highest levels of parking demand at suburban locations with free parking and no transit options. As a result, the space devoted to cars often exceeds the space devoted to humans (one study found mall parking lots were 20 percent bigger than the buildings they serviced), and the country is awash in a surplus of parking supply. In Tippecanoe County, Ind., for example, a group of Purdue University researchers noted, “[I]f all of the vehicles in the county were removed from garages, driveways, and all of the roads and residential streets and they were parked in parking lots at the same time, there would still be 83,000 unused spaces throughout the county.” And as Shoup argues, there is nothing free about this parking—everyone, even those who don’t drive, pays for it in one form or another, whether the invisible parking surcharge is built into retail prices or the various costs associated with parking-lot storm-water runoff.

Summers clams up

Caren Bohan has a 3,500-word profile of Larry Summers, in which she gets a lot of Washington insiders to talk about him on the record. The one person who doesn’t do much in the way of talking is Summers himself, who gets quoted all of three times; none of the quotes contains anything substantive. “If you want to do a profile, fine”, he seems to be saying. “Just don’t expect me to say anything”.

What’s with older Americans and credit card debt?

Lending Club just commissioned a new debt survey from Harris, which has some interesting results: (Update: See below, maybe they’re not interesting after all, and they’re just the result of a badly-worded survey).