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- Holder Demand for JPMorgan Plea Signals Hard-Line Shift – Bloomberg
William Black, who served as deputy director of the Federal Savings and Loan Insurance Corp. during the S&L crisis of the 1980s, said the department's actions haven't convinced him that bank executives will ever be charged.
"So, the large story remains," Black said in an e-mail. "No prosecutions under Bush and the first five years of Obama of the elite bank frauds that drove the crisis."
Leaving this hanging results in continued moral hazard. "… a moral hazard is a situation where a party will have a tendency to take risks because the costs that could incur will not be felt by the party taking the risk. In other words, it is a tendency to be more willing to take a risk, knowing that the potential costs or burdens of taking such risk will be borne, in whole or in part, by others." http://en.wikipedia.org/wiki/Moral_hazar d That's a good definition. So, the theory is that if bankers believe they have not had to face any negative consequences for doing unethical or illegal things, they will be more likely to do those bad acts again.
- How to Play the Online Real Estate Market – DailyFinance
Companies that provide a differentiated online service may have a chance to win this huge market. Online real estate company Trulia uses interactive maps and strategic acquisitions to capture market share. Competitor Zillow , on the other hand, emphasizes its "hidden inventory." The company has rich information regarding pre-foreclosures and homes under construction. Then there's Move , owner of Realtor.com, a huge database-driven website with more than 94 million properties. Which of these three companies has a bigger chance to win the promising real estate online market?
- EconoMonitor : Ed Dolan's Econ Blog – Why the Baltic Recovery is Not a Success Story for Austerity: Lessons for the US
We agree with the following by Ed Dolan ("an economist and educator with a Ph.D. from Yale University"):
Rational fiscal policy, as I have written many times before, should always be countercyclical, or at least cyclically neutral. The proper measure of the cyclical orientation of a country's fiscal policy is the path over time of its primary structural budget balance (PSB)—its surplus or deficit adjusted both for the state of the business cycle and for interest payments. As a country falls into recession, countercyclical policy requires discretionary tax cuts or spending increases that move the PSB toward deficit. As it recovers and nears full employment, the PSB should move back toward a small surplus. During a boom, when the economy is temporarily above its long-run potential level of GDP, the PSB should show a more substantial surplus.
What never makes sense is a policy that is deliberately procyclical. A procyclical policy is one that makes the business cycle more severe by moving the PSB toward deficit during a boom, with tax cuts and new spending, and then moves it toward surplus during a slump with tax increases and spending cuts.
That is the sense in which austerity is always a sign of policy failure. The need for austerity during a slump is simply the payback for recklessly running procyclical deficits during a preceding boom. …
Unfortunately, fiscal policy was, to one degree or another, procyclical in each of the Baltic 3 and Med 4 countries during the years leading up to the financial crisis. Even Spain and Estonia, which managed a few years of annual budget surpluses at the height of their booms, were really running procyclical primary structural deficits when we strip away the effects of temporarily elevated tax revenues.
Once those countries fell into recession, they had no real choice but to undertake austerity. The reason is simple: investors were no longer willing to buy their bonds at any sane rate of interest. Shut out of the market, austerity was their only real alternative.
… we should turn to the big lesson that we should draw from the varying experiences of the Baltic 3 and the Med 4: Procyclical fiscal policy is a bad idea. We shouldn't have done it. We shouldn't have recklessly cut taxes and plunged into unfunded wars in the years leading up to the global crisis. Right now, we shouldn't be slowing the recovery with premature budget tightening before we are back to anything resembling normal. What we should be doing is taking a cool, rational look at the way we conduct fiscal policy as a whole.
How about you, do you agree with that?
- EconoMonitor – The Return of Europe's Debt Crisis
The key elements of any banking union are deposit insurance and a centralised recapitalisation fund.
German opposition forced the ECB President to personally assure the Bundestag that a Euro-Zone wide deposit insurance scheme would not be part of the arrangements. There are no specific additional financial resources for recapitalisation, which remains reliant on the inadequate ESM. Germany insists that the banking union cannot be responsible for "legacy" risk, that is, problems originating from events before the finalisation of the banking union.
Increasingly, European governments are resorting to tricks to resolve problems of the banking system including inadequate stress tests, overly optimistic growth and asset price forecasts and accounting stratagems.
We agree that European measures to date have been less than were, and still are, needed.
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