Tag: regulatory arbitrage

The JOBS Act will create an extraordinarily criminogenic environment

The JOBS Act is insane on many levels. It creates an extraordinarily criminogenic environment in which securities fraud will become even more out of control. One of the forms of insanity is the belief that one can “win” a regulatory “race to the bottom.” The only winning move is not to play in a regulatory race to the bottom. The primary rationale for the JOBS Act is the claim that we must win a regulatory race to the bottom with the City of London by adopting even weaker protections for investors from securities fraud than does the United Kingdom (UK).

Regulators encouraging banks to game risk models

Regulators encouraging banks to game risk models

Andrew Haldane, in my opinion, generally has the right idea about banks and their risks, which are risks not just “to themselves” but to all of society and the global economy. Yet here Haldane’s endorsing the sort of sleight of hand that banks are all too ready to perform with no encouragement. Not a good sign.

Light at the End of the Tunnel?

Light at the End of the Tunnel?

Globally, coincident data is already slowing visibly across the globe with headline PMI readings and trade data coming in steadily lower. In that sense we are up against the wall again only so shortly after the shock of 2008/09 and this time, the ability of policy makers to respond is limited. However, I would be wary of calling this another 2008. One of the effects of experiencing a balance sheet recession with subsequent deleveraging is that trend growth falls and thus that the economy becomes liable to more frequent recessions.

Why we need regulatory cops on the beat – and why they make bankers cringe

Why we need regulatory cops on the beat – and why they make bankers cringe

If firms that defrauded their customers gained a competitive advantage over their honest rivals private market discipline became perverse and drove honest firms into bankruptcy.

The CEOs that lead accounting control frauds create intensely criminogenic environments by shaping perverse incentives that maximize such Gresham’s dynamics among their own officers – by basing executive compensation largely on short-term reported (fictional) income. They create perverse incentives among loan officers, “independent” professionals, and other firms (e.g., loan brokers) by hiring, firing, promoting, praising, and making wealthy those that will create and “bless” their fraudulent accounting practices. The art is to suborn – not defeat – “controls” by perverting them into allies.

With Ireland on the brink, the 1931 Credit Anstalt talk is resurfacing

With Ireland on the brink, the 1931 Credit Anstalt talk is resurfacing

Unless the ECB takes fast and dramatic action, it risks destroying the currency it is paid to manage, and allowing a political catastrophe to unfold in Europe. If mishandled, Ireland could all too easily become a sovereign version of Credit Anstalt – the Austrian bank that brought down the central European financial system in 1931, sent tremors through London and […]

Financial Reform Bill Encourages Risk-Taking

Financial Reform Bill Encourages Risk-Taking

As the details of the agreement struck by the key House and Senate conference on financial reform has been embraced favorably by the US equity market, that is being led by the financials, and the foreign currencies.    In the past three months the major foreign currencies, like the euro, sterling, yen, and the Canadian and Australian dollars are more than […]

Will we have to blow up a continent (again) before we stop Wall Street?

Marshall Auerback warns that unchecked speculation and fraud are threatening the European Monetary Union. Marshall Auerback here with a post which I originally published at New Deal 2.0 Surprise, surprise: Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece, Spain, Portugal, and undermined the euro by enabling European governments […]

Barclays and Protium: back to the future

I am astounded at how quickly we have returned to the pre-crisis days of yore. Credit spreads are down, the stock market is up, volatility is down, earnings are up and bonuses are up.  It looks like happy days are here again. But, I can’t help thinking this is all too much and too soon.  It’s as if we have […]