Conflicted Agents and Platonic Guardians: Interview with Alex Pollock

Warren Buffett said on Saturday he does not expect the credit default swap market to collapse, and possibly throw financial markets worldwide into chaos… “With credit default swaps, (the question is) whether counterparties could fail,” Buffett said, referring to wide-ranging failures. “I don’t think it’s going to happen, and I think the chances of it […]

Market Outlook: Ignorance or Insight?

There is no doubt that U.S. banks and more importantly, non-banks, have long been pursuing high risk practices in their approach to not only subprime, but also prime lending in the mortgage space. Loan structures that include low doc, no doc, I/O, low LTV, no down payment, etc. became rampant, particularly in more recent years […]

Looting the Vaults at the Central Banks

When I was a young central banker, we often spent our lunchtimes debating how best to rob our employer. Tempted by the thought of great mounds of gold ingots far beneath us in the third sub-basement, nestling deep in bedrock, we would speculate on the viability of various plans for plundering our nation’s store of […]

Jusen

The turmoil in the U.S. financial system since the last summer reminds me (and many others) of the problems in the Japanese financial system following the end of the land and stock prices boom in the late 1980s. The financial problem in Japan continued for more than a decade and Japanese economy experienced so-called “lost […]

Lessons from the Crisis for Financial Regulation: What we need and what we do not need

In its broad outlines the current financial crisis was foreseen, though not in its specific detail. Virtually all of the major central banks and international financial institutions had been warning about the underpricing of risk and excessive leveraging by 2006/7. the BIS had been warning about it for years. Admittedly few outside the banks themselves […]

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