Many blame America’s shadow banking system, where dangers lurked away from the scrutiny of complacent regulators, for the massive financial crisis of 2008-2009. Richard Fisher, president of the Federal Reserve Bank of Dallas, said in a speech on Thursday that he is now worried about the risks to China from its own version of the shadow banks.
Dallas Federal Reserve Bank President Richard Fisher wants the biggest U.S. banks broken up, calling them a danger to financial system stability and their perpetuation a drag on the economy. It’s an argument he’s made before – in full-length speeches, asides to reporters, parries to audience questions. (For the latest iteration, see Dallas Fed bank’s annual report published Wednesday.)
from The Great Debate:
On the basis of "stress tests" it ran, the Federal Reserve has given permission to most of the largest U.S. banks to "return capital" to their shareholders. JPMorgan Chase announced that it would buy back as much as $15 billion of its stock and raise its quarterly dividend to 30 cents a share, up from 25 cents a share.
In the more than two years that have passed since the start of Europe’s financial crisis, France has consistently aligned itself with Germany in pushing for greater austerity in so-called “peripheral countries” like Greece, Portugal, Spain and Italy. German Chancellor Angela Merkel even took the rare and somewhat awkward step of publicly campaigning for French President Nicolas Sarkozy.
The words “European bailout” normally conjure up images of inefficient public sectors, bloated pensions, corrupt governments. But market analyst John Hussman, in a recent research note cited here by Barry Ritholtz, says the reality is a bit more complicated:
Protests against Wall Street and the U.S. financial system are hanging over an annual gathering of economists and social scientists in Chicago. Yale economist Robert Shiller offered two cheers for capitalist finance, saying that while the U.S. free market system has contributed to higher living standards, the vehemence of the recent public outcry points to a need for greater democratization. This is how he put it in a speech:
Wall Street firms are begging the U.S. Treasury to take their cash, at least judging by the latest auction of short-term Treasury bills. Treasury sold $30 billion of four-week bills at a “high rate” (pause for laugther) of 0.000% on Wednesday, a mix of strong demand for year-end portfolio shuffling but also a reflection of ongoing fears of a credit crunch emanating from Europe.
Jason Lange contributed to this post.
Suddenly the shoe is on the other foot. The financial crisis of 2007-2008 had its roots in the U.S. banking system and then spread to Europe. Now, it’s Europe’s political debacle that threatens economic growth in the United States.
The mantra that regulation is holding back the U.S. economic recovery is playing into Wall Street’s efforts to prevent significant reforms of the financial industry in the wake two major crises – one of which continues to rage in the heart of Europe. The sector’s staunch opposition to reform was captured in JP Morgan’s CEO Jamie Dimon’s claim that new bank rules are “anti-American.”