Former Chairman of the Federal Reserve Alan Greenspan was once hailed as the omnipotent “maestro” of the U.S. economy, but his reputation suffered in the aftermath of the 2008 financial crisis. In The Man Who Knew: The Life and Times of Alan Greenspan, a new biography based on five years of research and unmatched access to Greenspan, Sebastian Mallaby presents a nuanced assessment of one of the most influential economic statesmen of the twentieth century and issues a warning about the future of finance. The story of Greenspan, according to Mallaby, is the story of the making of modern finance, for good and for ill.
U.S. officials should accommodate a larger role for emerging countries, particularly China, in the multilateral development bank system, but from a position of strength and with ambition for MDBs in U.S. policy.
Given the spectacle of this year’s presidential race, it is easy to overlook the parallel drama in the world of central banking. But when the monetary priesthood gathers Thursday for its annual seminar-cum-summer camp in Jackson Hole, Wyo., heretics will stalk the halls.
Speaker: Rana A. Foroohar Speaker: John P. Lipsky Speaker: Joseph E. Stiglitz Presider: Peter R. Fisher
Experts discuss the growth of finance in the U.S. economy since the Great Recession and its impact on business production and income inequality, and whether government regulations introduced after 2008 have proven effective in preventing another recession.
Authors: Benn Steil and Dinah Walker Producer: Andrei Henry
Central bank currency swaps are becoming the new cross-border tool of choice in financial crisis management. This interactive explores the rapid growth of currency swaps since 2007 and its implications for the global financial system.
China's new Asia Infrastructure Investment Bank has raised questions about United States policy in Asia. Several European nations, South Korea and Australia have signed on to China's initiative, which seeks to raise $50 billion to $100 billion for Asian development. While the U.S. remains cautious about this new China-led effort to fund infrastructure and development, it should welcome the participation of others.
Authors: Benn Steil and Dinah Walker Wall Street Journal
Benn Steil and Dinah Walker analyze the market reaction to the publication of the European Central Bank's long-awaited bank stress test results. The ECB's coddling of stress-tested banks — through the use of inflated inflation estimates and generous treatment of tax offsets against future profits which may never arise — precipitated a sell-off of bank stocks in a period when broad European indexes were up significantly. Unlike with the successful 2009 U.S. stress tests, there is no credible backstop of public funds available for Eurozone bank recapitalization, which would account for the ECB's reluctance to draw attention to the sector's undercapitalization.
The new BRICS Bank and Contingent Reserve Arrangement initiatives are, despite stated Russian ambitions, wholly unconvincing responses to the shortcomings of the Bretton Woods institutions and the dollar-based global financial architecture.
"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."
Authors: Benn Steil and Dinah Walker Wall Street Journal
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 they 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."
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