Financial Markets

Op-Ed

Our Tarnished Titans

Author: Sebastian Mallaby
Washington Post

For many decades, banking giants such as JP Morgan, Goldman Sachs and others, enjoyed the reputation that came with their economic clout, political influence and sheer wealth. However, recent events at Lehman Brothers and Bear Stearns have called into question this polished image, says Sebastian Mallaby.

See more in Financial Markets; United States

Op-Ed

Lasting Lessons for Global Investors

Author: Roger M. Kubarych
Nikkei

In this Nikkei article, Roger Kubarych outlines the lessons learned in the past few weeks that will be of lasting importance to global investors. He finds that "too complex to fail" is the prevailing U.S. economic doctrine—with the Bear Stearns bail-out as case in point. Kubarych also argues that banks are capitalists until they need government hand-outs but will revert to type once the crisis fades.

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Op-Ed

Double Bubble Trouble?

Author: Sebastian Mallaby
Washington Post

In this Washington Post op-ed, Sebastian Mallaby explores the double-bubble theory of the current financial crisis—not only do we face the bursting of a real estate bubble, but we also face the bursting of a second bubble which is the product of a quarter-century expansion in borrowing, excessive confidence in the dollar and an overblown faith in markets.  In order to deal with this double-bubble, Mallaby advocates two reforms: bringing complex, “over the counter” securities onto exchanges and requiring lenders to increase capital cushions during market upswings.

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Op-Ed

Fed Still Keeps Us Guessing with Rescue of Bear

Author: Amity Shlaes
Bloomberg

More government is the remedy that the U.S. Congress is reaching for as it moves to evaluate the Bear Stearns Cos. disaster. In this New York Sun article, Amity Shlaes recounts another banking catastrophe, the story of Bank of United States, to show that government involvement can also be a curse—especially when the role of public officials and institutions is unclear.

See more in Monetary Policy; Financial Markets; United States

Op-Ed

Can Recession Be Averted? Financial Markets Fear the Worst

Author: Roger M. Kubarych
Nikkei

Three developments have altered the US economic and financial climate this year - a distinct tightening of credit terms, a sudden slide in confidence, and emerging signs that the US labor market is softening – and they have been powerful enough to compel an almost unprecedented policy response by both the Federal Reserve and the US Government. Roger Kubarych argues that the monetary policy easing and fiscal stimulus will work, albeit slowly, but the effects on financial markets are less clear.

See more in Financial Crises; Financial Markets; United States

Op-Ed

Tie Me Up, Tie Me Down to Fixed-Rate Home Loan

Author: Amity Shlaes
Bloomberg

Until recently, increasing house values and low interest rates have made taking out an adjustable-rate mortgage a no-brainer. Even as the mortgage crisis has unfolded, the traditional model of fixed-rate mortgages is still viewed as uncool. Amity Shlaes argues that Washington should promote fixed-rate mortgages to curtail moral hazard in home borrowing. Both homeowners and the financial markets that serve them would feel better knowing that at least one part of American life is fixed.

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Op-Ed

A Market Run on Rationality

Author: Sebastian Mallaby
Washington Post

The most vivid image amid last week's financial turmoil came from the nation's biggest mortgage lender, Countrywide Financial Corp. Scenes at Countrywide branches conjured those grainy black-and-white images of Depression-era bank runs. Fear has taken over, and sound institutions are suffering along with poorly managed ones. Sebastian Mallaby argues that markets are punishing Countrywide irrationally - and dozens of other basically sound companies are caught up in the maelstrom.

See more in Financial Crises; Financial Markets; United States

Op-Ed

Harry Potter and the US Economic Puzzle

Author: Roger M. Kubarych
Nikkei

The current economic and financial situation in the United States amounts to a classic “happy-sad” story—not unlike the seventh Harry Potter book. Despite an overall positive economic scene, the slumping housing market and sky-high gasoline prices have affected public opinion on the economy and the underlying issue of globalization. Roger Kubarych argues that these economic concerns will shape the upcoming presidential campaigns, and globalization may turn out to be the evil “Voldemort” of the tale.

See more in United States; Financial Crises; Financial Markets