"Katsuyama and his team did measure how much more cheaply they bought stock when they removed the ability of some other unknown trader to front-run them. For instance, they bought 10 million shares of Citigroup, then trading at roughly $4 per share, and saved $29,000 — or less than 0.1 percent of the total price… It sounded small until you realized that the average daily volume in the U.S. stock market was $225 billion. The same tax rate applied to that sum came to nearly $160 million a day."
Benn Steil's latest op-ed in the Wall Street Journal, co-authored with Dinah Walker, explains why the ECB's anticipated foray into more aggressive monetary stimulus next week won't have any significant effect on the availability and cost of private-sector credit. The ECB believes that its ongoing bank stress tests will help revive the eurozone's moribund banking industry, but we argue that the tests are counterproductive without a mechanism in place to assure sufficient recapitalization of banks that fall short—as there was in the United States in 2009.
Benn Steil and Dinah Walker argue that the ECB's bank stress tests will roil rather than calm markets if recapitalization funds are not set aside in advance, as they were in the case of the highly successful U.S. tests in 2009.
"To meet quotas, employees have opened unneeded accounts for customers, ordered credit cards without customers' permission and forged client signatures on paperwork. Some employees begged family members to open ghost accounts."
On December 10, 2013, the Federal Deposit Insurance Corporation approved the "Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds," part of the Dodd-Frank Act commonly known as the Volcker Rule.
"After a decade of paedophilia scandals, the allegations of financial impropriety seemed set to unleash another storm of criticism and had to be addressed. Outside auditors as well as financial risk consultants were already coming into the Vatican but the arrest of Scarano made the case for reform unavoidable. "We cannot have any more scandal. It is so shameful," a senior member of the Vatican's financial administration said."
Peter Orszag writes that the Reserve Bank of New Zealand's limits on high loan-to-value mortgages are a model for the kind of actions the U.S. Federal Reserve could have taken to manage the U.S. mortgage market and reduce the risks that the housing bubble posed to the financial system.
"As money has rushed into emerging markets in recent years, this has created an image of abundant liquidity. But this image may be dangerously illusory, some policy makers fear, as one of the little-noticed ironies of the 2013 financial system is that there may now be fewer–not more–shock absorbers in the markets than there were before 2008. This factor may explain why this summer's gyrations in emerging market assets were so dramatic."
"Managing a bond fund these days is a peculiar business. Global central banks have aggressively supported government bonds, driving up—many would say distorting—their prices. Market observers generally agree that support will eventually ebb, bringing prices back down and bond yields up, but no one can be certain when. What is an investor to do?"
"Yellen will have to continue the Fed's easy money policies. She has no choice. The economy is getting no better, and a consensus is forming that stopping the stimulus could make things suddenly worse."
G20 finance ministers and central bank governors issued this communiqué at the summit in Moscow on February 15 and 16, 2013. Major agreements from the discussions include refraining from devaluing their currencies devaluation and enforcing corporate tax laws.
The Council on Foreign Relations' David Rockefeller Studies Program—CFR's "think tank"—is home to more than seventy full-time, adjunct, and visiting scholars and practitioners (called "fellows"). Their expertise covers the world's major regions as well as the critical issues shaping today's global agenda. Download the printable CFR Experts Guide.
The author examines Pakistan's complex role in U.S. foreign policy and advocates for a two-pronged approach that works to quarantine threats while integrating Pakistan into the broader U.S. agenda in Asia.