"… equally efficacious, and equally a hoax." – Benjamin Disraeli, 1848[1] One of the highlights of the U.S. summer for Fed watchers is the annual ritual in which the Fed's economic soothsayers peer into their crystal balls, a.k.a. their stress tests, to reassure us that the U.S. banking system…
Recently, the UK Daily Telegraph ran a remarkable Op-Ed written by William Hague, the just-retired Conservative politician and former UK Foreign Secretary. The title alone was startling: "Central bankers have collectively lost the plot. They must raise interest rates or face their doom." Now I confess that…
Tom Clougherty's recent Alt-M post on competition (or the lack thereof) in UK banking nicely highlights the problem posed by barriers to entry into the British banking industry. That there is indeed an entry problem should be obvious from the fact that Metro Bank, which opened in…
It looks like Deutsche Bank is heading toward failure. Why might we be concerned? The problem is that Deutsche is too big to fail — more precisely, that the new Basel III bank resolution procedures now in place are unlikely to be adequate if it defaults. Let's…
In a previous blog posting, I suggested that there is no case for capital adequacy regulation in an unregulated banking system. In this 'first-best' environment, a bank's capital policy would be just another aspect of its business model, comparable to its lending or reserving policies, say. Banks'…