Rolfe Winkler

Why not Baby Banks?

January 25, 2010

The President is right to target firm size if he wants to insure no financial firm can cause a system failure. Yet despite clear evidence that banks are already too big, Obama’s proposal won’t cut them down. It would only limit future growth by acquisition.

The Ascent of Volcker

January 21, 2010

So, wow, the Obama administration has reacted very quickly — perhaps too quickly — post the Massachusetts Senate election. After proposing a tax on bank liabilities, Obama is taking an even tougher line, adopting recommendations from Paul Volcker that banks be limited in their size and scope.

Lunchtime Links 1-19

January 19, 2010

MUST READSouring mortgages, weak market put FHA on tightrope (Timiraos, WSJ) Good article, though Timiraos doesn’t address the absurd circularity perpetuated by FHA Chief David Stevens when Stevens says, on the one hand, that more gov’t lending protects the housing market from further declines, while simultaneously arguing that such lending isn’t sustainable. That said, Timiraos has worked lots of interesting stuff into this piece, especially towards the end. For instance, in late ’07 investors were refinancing at-risk borrowers into FHA loans in order to shift risk to taxpayers. Barney Frank defends permanently raising FHA maximum loans for certain geographies to $729k. Also lots of data about how badly FHA loans are performing.

Move your money

December 30, 2009

Arianna Huffington and Rob Johnson are organizing a big bank boycott. They want depositors to take their money out of Too-Big-To-Fail banks and put them in smaller, high quality banks.

Politics and bank regulation don’t mix

December 8, 2009

The Federal Deposit Insurance Corp tried to seize and sell Cleveland thrift AmTrust last January but local politicians intervened. In the end, the bank still went bust 11 months later – a delay that may have increased losses to the U.S. regulator’s funds. As Congress debates banking reform, AmTrust provides a useful warning that the regulatory apparatus needs to be kept free from politics.

Poole on fixing TBTF

November 29, 2009

William Poole, the last President of the St. Louis Fed and now with the Cato Institute, has a good piece on fixing the TBTF problem in a recent issue of the Financial Analysts Journal. Based on a speech given last April, it’s still highly relevant.

If banks can delay, pray

November 24, 2009

The “too-big-to-fail” amendment offered by Representative Paul Kanjorski has good intentions, but fatal flaws.

Shock and awe the TBTF

November 23, 2009

For all the fear that bankers have expressed about Representative Paul Kanjorski’s amendment to end “too big to fail,” the final text shows that they don’t have much to fear. While the amendment gives regulators new power, it’s unlikely they’d actually use it.

Sander’s TBTF amendment

November 9, 2009

Now THIS is legislation to get behind. From Senator Bernie Sanders, Independent from VT.

Legislation coming to break up big banks?

November 5, 2009

In a note to clients yesterday, Paul Miller of FBR Capital Markets wrote:

We are hearing that discussion of breaking up large financial institutions that pose systemic risk to the market is gaining traction on the Hill. At this point, discussions are in the early stages, but we understand that an amendment addressing breaking up institutions deemed “too big to fail” could be introduced in the House over the next few days. How does one define “too big to fail” and how would the divestiture process work – these are good questions that Congress will have to address as the discussion moves forward. To our understanding, any amendment that could be introduced in the coming week would likely be vague and would give the regulators discretion to determine which institutions qualify as “too big” and how to address the risk they pose to the system.

Bubble-wrapping the China shop

October 29, 2009

Do you think we should establish a government-backed insurance fund for big banks’ risky trading activities? Probably not. But that’s precisely what the administration and Congress agree should be done. Today Sheila Bair proposed her own variation on the theme. At first glance her idea sounds better, but it’s just as bad as the others.

Break up the big banks

September 15, 2009

President Barack Obama pledged on Monday “to put an end to the idea that some firms are ‘too big to fail.’”  Though he outlined some worthy prescriptions, he failed to face up to the very size and power of the financial institutions that makes “too big to fail” possible.

Bair on ending “too-big-to-fail”

July 23, 2009

FDIC Chairwoman Sheila Bair is right now testifying in front of the Senate Banking Committee on “establishing a framework for systemic risk regulation.”  This is of course hugely important.  How do we end “too-big-to-fail?”  And how do we resolve failures that are so big they pose a systemic risk?