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Tuesday, August 30, 2016
Tags Financial crisis

Tag: financial crisis

The problems at Deutsche Bank

Deutsche bank’s share price has fallen by more than half in the last year. For some insight into the background see these two extracts...

Central problem with banks is “too complex to fail” not “too...

Recent stumbles by Bernie Sanders illustrate a misdirection in his attack on the banking establishment. The central problem is not so much “too big to fail” but “too complex to fail”.

No savings glut, investment opportunities abound

The belief that the zero lower bound to interest rates is a significant obstacle to stimulating demand supposes that there is a host of projects that promises a prospective return less than zero but more than, say, minus one half per cent. This completely misunderstands the nature of the barriers to long-term productive investment. We need less financial ingenuity and more common sense.

UK invites more bank failures by backtracking on executive liability

The Parliamentary Commission on Banking Standards, which reported in 2013, recognised the central significance of executive responsibility for systemic failure in the sector. It proposed a senior managers regime which would hold executives liable for wrongdoing in activities for which they had responsibility even if they had no specific knowledge of the improper conduct. Having accepted this recommendation, the UK government is now backtracking.

HBOS report yields three important lessons for all businesses

British regulators have finally published their report into HBOS, the bank formed from the merger of Halifax with Bank of Scotland, more than seven years after its collapse. The 600-odd pages contain much detail on events and personalities. But there are general lessons for all businesses. Avoid the diversifier’s fallacy. Beware the winner’s curse. Fear adverse selection.

Limited liability led to limited care for other people’s money

The financial sector in the 1980s and 1990s was characterised by a rush to incorporation. The mantra of “shareholder value” restored the nexus between finance and business that Smith had feared and Brandeis denounced. And the stage was set for negligence and profusion to prevail once again.

We were better served by old-fashioned relationship-focused bank managers

The bank manager used to be a community figure who would base his (they were all men) lending decisions as much on his local knowledge and the character of the borrower as on figures. He did rather better than his modern-day, intellectually-superior equivalent.

Solutions to the Greek debt crisis should be found through pragmatism...

The Greek crisis is not simply the result of Athens’ inept public administration but also of an extensive carry trade on eurozone convergence by northern European banks, notably in France and Germany, which obtained short-term profits by matching northern eurozone liabilities with southern eurozone assets. For every foolish borrower there is usually a foolish lender.

We can reform the economics curriculum without creating new disciplines

Following the global financial crisis there has been much discussion of curriculum reform in university economics teaching. More pluralism is required, but there is no need for "two communities within the same discipline".

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