Felix Salmon

Why banks shouldn’t trade

October 9, 2012

Mark Gongloff has found a new IMF working paper, by Arnoud Boot and Lev Ratnovski, which basically comes to the conclusion that banks shouldn’t be trading in financial markets. This is a conclusion others have come to as well, of course — most prominently, the Volcker Rule in the US and the Vickers Report in the UK both attempt to legislate such things, on the grounds that it’s simply not just for banks to engage in risky trading activities, safe in the knowledge that if they blow up they’ll end up getting bailed out by the government.

How prepaid debit is displacing checking accounts

October 8, 2012

Prepaid debit cards just keep on getting better — ever closer, that is, to the holy grail of essentially replicating the free checking account of yore. Checking was never actually free, of course: it was basically a bait-and-switch, where people thought that they were getting free checking but then got hit with huge unexpected fees when they could least afford them.

Who is to blame for Ina Drew’s downfall?

October 3, 2012

Susan Dominus has a big 7,500-word NYT Magazine feature on the rise and fall of Ina Drew, featuring a couple of bland quotes from Jamie Dimon but nothing — nothing on the record, at least — from Drew herself. (We’re told explicitly about four different people who declined to comment when approached by Dominus, including “London Whale” Bruno Iksil and his boss Achilles Macris; Drew is not one of the four.)

JP Morgan’s depositors needn’t worry about its gambles

September 24, 2012

Bill Cohan declares, today, that the money JP Morgan lost in its infamous “London Whale” trades actually belonged to depositors. He’s wrong about that.

Should banks get to deduct their interest costs?

September 21, 2012

I’m delighted to welcome Jesse Eisinger to the ranks of people who think it’s high time that we abolished — or, at the very least, significantly curtailed — the tax deductibility of interest. Paul Volcker was an early member; the CBO has been making the case for a while; and Treasury has been very explicitly in favor since February.

Why we can’t simplify bank regulation

September 14, 2012

Is simplicity the new new thing? The front page of the new issue of Global Risk Regulator — the trade mag for central bankers around the world — features an excellent article by David Keefe about Sheila Bair, Andrew Haldane, and calls for a “return to simplicity”. Bair tells Keefe that “we’re drowning in complexity”:

How many U-turns can a bank fit inside a loophole?

August 9, 2012

The NYT has two excellent articles about the Standard Chartered affair today. Read this one first, about the law which may or may not have been broken; and then move on to this one, about the reaction to the case in London.

Dennis Kelleher, Libor, and high-frequency trading

August 8, 2012

Dennis Kelleher of Better Markets has responded to my post in which I said, inter alia, that he was wrong about high-frequency trading. He, of course, says that I’m wrong — indeed, that I’m “over the top and just plain wrong in many ways”, and that the post is “self-discrediting”. Blogfight! So, fair warning: this post is my response to his response to my post; if you’re not into that kind of thing I fully understand, and you’re probably much more grown-up than either of us. Anyway.

The danger of repo

August 6, 2012

Remember how there’s a very good chance that Treasury’s new floating-rate notes are going to be linked to some kind of repo benchmark? Well, here’s another reason that’s a bad idea: the repo market is shrinking fast, at least in Europe — and if it can shrink in Europe, it can do so in the US, as well.