The Growth of Shadow Banking

By Gaston Gelos and Nico Valckx: Shadow banking has grown by leaps and bounds around the world in the last decade.  It is now worth over $70 trillion. We take a closer look at what has driven this growth to help countries figure out what policies to use to minimize the risks involved. In our analysis, we’ve found […]

Larry Summers’ Contradictory and Dishonest Defense of Administration’s Bank-Focused Crisis Response

If you are going to succeed in rewriting history, a necessary condition is that the public doesn’t remember it very well. Unfortunately, that requirement is not in place for the architects of the Administration’s blatantly bank-friendly crisis responses. Timothy Geithner’s book Stress Test, in which he tries selling the idea that rescuing the banks was […]

China: Market Mechanisms Need Official Help

Last July, the People’s Bank of China removed controls on the lending rate and began liberalizing savings rates. This aggravated the volatility of money market rates. It is becoming clearer to PBOC officials that even the successful functioning or market mechanism require an important official role. PBOC Governor Zhou told a conference in Beijing last […]

Bank Profits – With A Little Help From The Fed!

Global stock prices have rallied significantly since 2009. Financial stocks have increased albeit off a low base, with US banks up by over 200%. But improvements in the fortune of banks may be misleading. To paraphrase George Bernard Shaw, financial markets have substituted the “obsolete fictitious for the contemporary real”. Central bank policies, especially low […]

Bank Failures Are “Inconceivable” Under the Latest Neoclassical Fantasy

Only theoclassical economics constantly recycles variants of its worst ideas that have proven disastrous when they have influenced policy.  Other fields advance because they embrace the scientific method.  Theoclassical economists repeat their worst errors because they embrace anti-governmental dogmas that blind them to the inherent weaknesses of the corporate form and limited liability.  This represents […]

Non-Lessons of the Financial Crisis

As the fifth anniversary of the Lehman bankruptcy approaches, the Internet is filling up with reflections on the financial crisis and the ensuing years. My main feeling, as expressed in my latest Atlantic column, is amazement at how little we seem to have learned. Looking back, the period in late 2008 and early 2009, when it was obvious […]

Happy Anniversary Lehman Brothers, And What We Haven’t Learned About Wall Street Over the Past Five Years

While attention is focused on Syria, the gambling addiction of Wall Street’s biggest banks is more dangerous than ever. Five years ago this September, Lehman Brothers went bankrupt, and the Street hurtled toward the worst financial crisis in eighty years. Yet the biggest Wall Street banks are far larger now than they were then. And […]

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