Confessions of an English regulation-eater

Brad DeLong, a repenting American deregulator, says: If deregulation looks like such a bad idea now, why didn’t it then? The first school of thought, broadly that of the United States’ Republican Party, was that financial regulation was bad because all regulation was bad. The second, broadly that of the Democratic Party, was somewhat more […]

I wouldn’t be surprised if businesses competed

Shock, horror, a shareholder-owned business engages in competition. Who would have thunk it? From the FT: Patrick Pearson, head of the unit in the European Commission’s internal market directorate general responsible for regulating OTC derivatives and clearing, told a London conference that margin – the money that members of a clearing house post to it […]

Proudly a G-SIFI

As one banker of my acquaintance said, apropos the new FSB capital charges for the largest banks, I already have the t-shirts printed for my team; they say ‘_, Proudly a G-SIFI’. (Far be it from me, of course, to say what goes in the gap, beyond that it is the name of a top […]

Llama llama llama comedian

You come and go, you come and go. (I know, this is a new low.)

Looking pretty foxy

Slippery when wet: arbitrage channels and market efficiency

How much frictional cost do you want in a market? Just enough, obviously. The question and answer were brought to mind by a recent speak by Myron Scholes reported in Risk magazine. He warns: “If you restrict or require more capital of banks, what will happen is that they have to wait until the deviations […]

Why don’t you write me?

From Marco Strimer, writing to the FT: …The focus therefore should [… be] on the capital strength, access to liquidity and the employment of prudent risk management standards of the CCPs. Therefore, any CCP worth its salt is extremely well collateralised and, as a result, capable of mitigating any future risk. Regardless of the debate […]

The strange death and patchy resurrection of professional integrity?

I work with lawyers and accountants on pretty much a daily basis. Many of them are good people; many of them have impeccable professional standards. So I don’t entirely buy the line that Mark Everson plays in the New York Times that lawyers and accountants have lost their integrity. But I do think that there […]

Nathan Myhrvold on Extreme Events

From a wise Bloomberg column (HT FT Alphaville): Complacency is baked into our species. We can’t resist thinking that recent experience defines the future. Give us a run of good luck, and we are apt to turn that into an implicit expectation that our luck will continue — even that we are entitled to it. […]

Classy Marxists

I don’t usually comment on political theory, but a post of John Quiggin’s encourages me to venture into new ground. As I see it, Quiggin does three things. First, he identifies what an old fashioned marxist would call the ruling class: there clearly is a self-conscious and generally dominant class, centred on control of capital, […]

Quote of the month

Mandatory clearing applied indiscriminately across markets will increase systemic risk. Alexander Justham, Director of Markets at the UK FSA Interestingly Justham is on the board of ESMA, so he is more than the average regulator. He was speaking at the International Derivatives Expo earlier this month: the link to the full speech is here. (And […]

The last bucket

The recent hints about where the Financial Stability Board may come out on capital for systemically important financial institutions (SIFIs) have one interesting feature. They might have a bucket for institutions which do not yet exist. Here’s the idea. The large firms – Citi, JP, Deutsche etc. – are already systemic. But a merger of […]

Waiting for a default

Much of the financial world seems to be waiting for a Greek default. I am still with Barclays; I don’t think that it is happening, at least this year. OK, John Lipsky is a wildcard whose behaviour might turn the mildest of men into a conspiracy theorist, but this is still fundamentally about politics rather […]

Wednesday Humbug

Someone who knows little about banking but seems determined to continue writing about it says: From a regulatory perspective, banks have good profits and bad profits. Bad profits are the ones coming from risky structured products and leveraged trading desks; good profits are the ones which come from the lending investment capital to individuals, small […]

The Overton Window of Financial Policy

So what’s the Overton Window? Wikipedia tells us: The Overton window, in political theory, describes a “window” in the range of public reactions to ideas in public discourse, in a spectrum of all possible options on a particular issue. It is named after its originator, Joseph P. Overton, former vice president of the Mackinac Center […]

Pins before bubbles

This is a tale of two links. The first is from the BIS quarterly here. In it, Daniel Heller and Nicholas Vause highlight the current state of OTC derivatives clearing: At present, central clearing covers approximately 50% of the $400 trillion of outstanding interest rate swaps (IRS), 20–30% of the $2.5 trillion of outstanding commodity […]