Afternoon Links 11-10
Mishkin defends bubbles (Yves Smith) Yves tears apart former Fed Governor Frederic Mishkin’s op-ed in FT, for good reason.
Bank told to raise more common equity (8-k filing, ht frog) Hanmi bank in CA was told to raise capital, tangible capital in particular. Hopefully regulators continue in this direction with other banks.
FDIC’s “merit” reviews preceded failures (Sterngold, Bloomberg) At least three U.S. banks failed in the past year after the Federal Deposit Insurance Corp. deemed them healthy enough to qualify for a program that reduced the time examiners spent on reviews by at least 20 percent.
Dodd proposes bold financial overhaul (Drawbaugh, Reuters) Like the original systemic risk bill in the House, this one would have taxpayers front the cost of resolutions. Sheila Bair and Tim Geithner are on opposite sides of this argument. Geithner says a standing fund for financial resolutions would feed moral hazard. He’s right. Her argument is that financial firms would never pay back taxpayers. She’s also right. To me, this gets to the heart of why relying on resolution authority to solve the TBTF problem isn’t enough. You need to get medieval on these guys, breaking them up and simplifying their biz models so that they don’t pose a systemic risk in the first place.
Schabowski shrugged (Meyer, Slate) The unanswered phone calls and misunderstood memos that helped bring down the Berlin Wall.
Miss England gives up crown over brawl reports (Holden, Reuters) Eat your heart out Carrie Prejean.
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