Tag Archives: economics

The Fed’s Rule by Fiat

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Federal Reserve officials strongly signaled they will be toughening big-bank capital requirements even further than they have since the 2008 crisis, a move that will further increase pressure on the largest US banks to consider shrinking.

Fed governors Daniel Tarullo and Jerome Powell, in separate public comments Thursday, said the Fed will require eight of the largest US banks to maintain even more capital to pass the central bank’s annual “stress tests.”

Notice that they’re acting by rule and moving sharply away from their knitting, which is to concern themselves with maintaining price stability and full employment.  With this rule, they’re nakedly broadening their interference in the free market place.

Here’s Tarullo:

“Effectively this will be a significant increase in capital,” Mr Tarullo said on Bloomberg television.  He recently said in an interview that he expected big banks to have to change their size, organization, or business model in response to the Fed’s regulatory moves.

Never mind that a business’ size, organization, or business model are solely the decision of the business’ owners—private citizen shareholders—and not the interest of any government in a truly free market economy.

Here’s Powell:

“I have not reached any conclusion that a particular bank needs to be broken up or anything like that,” he said.  The point is to “raise capital requirements to the point at which it becomes a question that banks have to ask themselves.”

This is disingenuous.  When it’s government rather than owners forcing the question onto a business, it’s government dictating the answer.  Especially when using this sort of tool for the forcing.  Capital requirements and associated risk handling are solely the decision of the business’ owners—private citizen shareholders—and not the interest of any government in a truly free market economy.  Assessment of the outcomes of those decisions are solely the province of the business’ owners, customers, and a free market; they are no concern of government.

Of course these two and their fellow Fed Governors know this.  The move, though, is consonant with the Left’s general move toward ever larger government with ever larger intrusions into private affairs, driven by their ideology that Government is the answer, and where it fails the proper corrective action is to increase Government.

A British Exit from the EU

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There’s an aspect of so what to the question: what would actually change if the Brits vote to go their own way in a few weeks?  One set of answers involves British influence on the continent or within the EU.

[I]f the British do vote for Brexit and then have to trade with the EU, the UK would in fact find itself isolated with very little influence over regulatory standards in the single market.

Great Britain already has very little influence over those regulatory standards: look, for instance, at the hue and cry from the rest of the EU over how the British comport themselves, and regulate others, in London’s financial markets.  Also, from outside, the British would be utterly free to set their own market regulatory standards without interference or “help” from their Continental betters.

It’s the same with welfare programs and immigration generally.  Although the British do fare quite a bit better here—as part of British Prime Minister David Cameron’s pre-British exit (Prexit?) negotiations with the EU, he won concessions (not enough, some would say) regarding the amount of British welfare payments would be paid to migrant (not immigrant) workers and their stay-at-home (country) families.  But the French already are up in arms over English impertinence at not letting immigrant/refugees to flow across the channel quickly enough to suit France.

Neither of those problems would be any worse with a British exit, and the British would be in absolute control over them were they to go their own way.

The upshot looks as though there is, indeed, a what to the so what—and it favors a British exit from the EU.  Which, in addition to giving Great Britain a great deal more flexibility and complete national sovereignty, would restore the British to their historical role of power broker among hegemon wannabes on the continent.

That last isn’t all bad for the British or for the continent.

What Hath Obamacare Wrought

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The Wall Street Journal provided an amazing graphic in its Wednesday edition.ObamacarePremiumIncreasesEven accounting for bad estimating by the health coverage plan companies, this is a clear illustration of the depth of President Barack Obama’s (D) lie when he said insurance costs would go down by roughly $2,500 per year.

It’s also going to get worse: a number of programs intended to buffer these providers against such increase needs expire in 2017, including “risk corridors,” which then will be funded solely by health coverage providers’ own wealth redistribution “premiums” paid into the program by profit-making providers for the sake of money-losing providers.

An Aspect of Europe We Might Want to Emulate

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Or at least one nation of Europe….

Germany has preliminarily approved an immigrant assimilation law.

Under the draft integration law, which now goes to parliament for approval, migrants would have to fulfill certain requirements, such as taking special classes, and authorities would be entitled to decide where in the country they should live. Those who don’t comply could face sanctions.

At the same time, the integration law aims to facilitate access to the job market and to apprenticeship programs for refugees, allowing them to more quickly earn a living.

Among the requirements:

  • language training
  • education in German laws
  • education in cultural basics
  • states will be able to decide where refugees should live in their state…avoid the creation of ethnic ghetto

We already do—or used to do—a pretty good job of assimilating our immigrants.  One thing we could benefit from, though, is a mechanism to better control initial living locations, so as to mitigate our own Little [China/Italy/Syria/etc) problem and to improve assimilation.

And so to better preserve our American culture.

Maybe It’s Time

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…to start locking banks out of SWIFT (no, I don’t mean as a matter of National Policy).

A little-noticed lawsuit details a hacking attack similar to one that stole $81 million from Bangladesh’s central bank, saying cybercriminals stole about $9 million last year from a bank in Ecuador.  The case suggests global bankers haven’t been sharing critical information to prevent such heists.

And

A third attack, from December 2015 at a commercial bank in Vietnam, was detailed last week….

The banks aren’t telling SWIFT about these attacks, either.

A spokeswoman for Swift said Thursday that the network was never told of the earlier hack.  “We need to be informed by customers of such frauds if they relate to our products and services, so that we can inform and support the wider community,” said spokeswoman Natasha de Teran.

Bad security and victim banks didn’t tell SWIFT, despite SWIFT warnings:

We specifically remind all users to respect their obligations to immediately inform Swift of any suspected fraudulent use of their institution’s Swift connectivity or related to Swift products and services….  The security of our global financial community can only be ensured through a collaborative approach.  To this end, it is essential that you share critical security information related to Swift with us.