‘Socially Responsible Investing’ Archive

The Banks Aren’t Giving an Inch

Sunday, July 14th, 2013

Jamie Dimon and other Wall Street leaders continue to publicly bemoan the fact the 2010 Dodd-Frank financial industry reform act. They complain about having to deal with too much “uncertainty.”

Behind the scenes, though, they’re doing a give-no-ground defense against many of the reforms we most need, precisely because they reform practices the banks have used to our harm and their profit. Where they can, they de-fang. Where they can’t de-fang, they delay.

Sarah N. Lynch of Reuters picks up the story:

SEC frustrated over pace of U.S. financial crisis reforms


Longsplice rope

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New Ways of Cheating

Wednesday, June 12th, 2013

Once again we see the familiar problem with regulating the financial industry: so many companies will cheat if they can. It’s seldom the “outright lying” sort of cheating, but rather the “maybe we can hide this little bent rule” sort. They’ll take a little more risk than they’re allowed to, hoping to get a little more profit than they would have, but setting themselves up for a failure and loss that will seem to come out of nowhere.

Even as the Dodd-Frank regulations are being delayed and neutered by the industry, some companies are trying to sneak around long-established rules. When they do that, they risk devastating their general-public customers, or getting another taxpayer bailout, or both.

Here’s an interesting post by Mary Williams Walsh in the New York Times’ Dealbook blog:

Insurers Inflating Books, New York Regulator Says



Volcker blasts bank regulation inertia

Thursday, May 23rd, 2013

Respected former Federal Reserve Chairman Paul Volcker had some caustic comments for the continuing muddle of agencies involved in regulating US banks, and the continuing lack of effective regulation. As quoted in the WSJ:

Volcker: Multiple Bank Regulators Is ‘Recipe for Getting Nothing Done’

Thank you, Mr. Chairman. I hope someone listens.


Clarifying Keynesian Economics

Friday, May 10th, 2013

British Economist John Maynard Keynes has been hugely influential because of ideas he developed while studying the Great Depression, which was then ongoing.

His key observation was that when an economy has been dealt a severe blow, such that there’s mass unemployment and shuttered factories, then the economy if left to itself could take a very long time to recover. That’s simply because unemployed people spend as little as possible, and businesses only re-open factories or build new ones to meet rising demand for goods. Even if, as theory recommended at the time, wages and interest rates dropped to the point where many more people would be hired, those workers’ spending power would be too low to drive growth in the short or medium term.

Keynes proposed that in such a case, government could speed the recovery immensely by borrowing money (interest rates were low and business were not borrowing to build) and funding productive work. Workers would have money to spend for current consumption, and roads, bridges, schools, etc. would be built to make future growth more efficient.  When the recovery came around, the special projects would wind down and the government would use the increased tax revenues to pay down the debt.

Some people hated the idea, not least because it gave a very big role in the economy to government. Arguments have raged, and good and bad points have been raised.

Seven of the most common bad points are discussed by Mark Thoma in The Fiscal Times:

Seven Myths about Keynesian Economics