[ Pobierz całość w formacie PDF ]
.Thus, ratings were often viewed as just another regulatory requirement.In other cases, good ratings by SEC-approved rating agencies may have fooledsecurities buyers to understate the risk of what they were buying (MBSs, forexample).After the demise of the MBS market, the rating agencies got a bad press.But it should not be forgotten that they were part of a large financial reg-ulatory complex that was designed, structured, and run by government.Defending his company before the SEC, a Moody’s executive made anveconnect.com - licensed to ETH Zuericextraordinary statement:.palgraRating agencies are staffed by ordinary people with families to support andbills to meet and mortgages to pay.Government regulators are inadvertentlyom wwwsubjecting those people to extraordinary pressure, and share accountability forany scandals that may result.34The statement is extraordinary not by what it says, which is pretty obvious,yright material frbut by the implication that government bureaucrats would not be, as “gov-Copernment regulators,” “ordinary people with families to support and bills tomeet and mortgages to pay.” More on this in Chapter 7.For most of American history until the onset of the last economic crisis,banks and other financial institutions had been enmeshed in a tight financial-regulatory complex weaved by the state and the interests it caters to.Theseinterests may be the interests of the bankers themselves, or the interests ofimportant customers as in the case of branching.More than institutions to10.1057/9780230118478 - Somebody in Charge, Pierre LemieuxFebruary 7, 201120:44MAC-US/CHARGEPage-909780230112698_06_ch04The Laissez-Faire Scapegoat●91maximize depositors’ value, writes Charles Calomiris, banks often appear “asa tool of the state.” They were chartered by government (federal or state)to achieve certain goals, of which the financing of the state itself was oftenparamount.35 Still today, one wonders if banking regulations are not partlydesigned to help finance the public debt.Capital regulation grants prefer-ential treatment to government securities as they are considered riskless andrequire no capital; banks are thus incited to use a higher proportion of theirdepositors’ money to buy government securities instead of granting privateloans.Before the recent economic crisis hit, banks were so tightly regulatedthat one might be forgiven to wonder if there were still private organizationsin the strict sense of the term.A Phantom DeregulationveConnect - 2011-04-01When the first signs of an economic crisis appeared in 2007, banking andalgrafinance were under the constant surveillance and tight regulation of a host ofh - Pregulatory bureaus.The Federal Reserve System (Fed), the Federal DepositInsurance Corporation (FDIC), the Comptroller of the Currency, and theOffice of Thrift Supervision (OTS) were the main banking regulators.Tothese must be added other less important but nonetheless active regula-tors: the Commodity Futures Trading Commission (CTFC), the NationalCredit Union Administration, the Federal Housing Finance Board (FHFB),the Farm Credit Administration, and the Financial Crimes EnforcementNetwork.In 2007, the regulatory budgets of these organizations stood at$2.1 billion (all values in constant 2000 dollars).If we except the FDIC,veconnect.com - licensed to ETH Zuericwhose regulatory budget oscillated and declined between 1997 and 2007,from $750 million to $478 million, the trend in virtually all other banking.palgraand finance regulatory bureaus has been straight upward.The global pictureis a brisk increase from about $200 million per year in 1960 to $2 billion perom wwwyear starting in the mid-1990s up to 2007.The 12-year plateau from 1995to 2007 must not hide the fact that over 47 years from 1960 to 2007, theregulatory expenditures in finance and banking had been multiplied by 11in constant dollars, for an annual rate of growth of 5.2 percent per year.36yright material frA plateau is not deregulation.This growth factor of 11 over the 1960-2007Copperiod is exactly the same we have calculated for total regulation (excludinghomeland security) in the previous chapter.Banking and finance regulationgrew in step with other regulations.Could it be argued that regulation has increased less than the growth offinance and that, in some way, regulatory intensity has decreased? This isnot what available data show.From 1960 to 2007, the proportion of financeand insurance in GDP has more than doubled, from 3.6 percent to 7.910.1057/9780230118478 - Somebody in Charge, Pierre LemieuxFebruary 7, 201120:44MAC-US/CHARGEPage-919780230112698_06_ch0492●Somebody in Chargepercent;37 which is far from the 1,000 percent increase (multiplication by11) in constant-dollar regulatory budgets.Could it be that the growth in theshare of finance combined with the growth of GDP account for the expandedregulatory budgets? No more.Using the BEA quantity index of financial ser-vices and insurance, we can calculate that the production of real insurance andfinancial services has grown by seven times from 1960 to 2007,38 still muchless than the factor of 11 for the multiplication of regulation.The only seri-ous argument that could be made is that, during the plateau of total bankingand financial regulation between 1995 and 2007, the production of financialservices has increased by 58 percent, meaning that, in some sense, regula-tion per “unit” of financial service has decreased during these ten years.Butrecall that the plateau occurred after a tripling of constant-dollar regulatoryexpenditures from the beginning of the 1980s to the mid-1990s.veConnect - 2011-04-01If there is no smoke without fire, where does the idea come from thatAmerican finance had been recently deregulated? There was some mod-algraest deregulation, which consisted in opening the banking industry to moreh - Pcompetition.This deregulation took four forms [ Pobierz całość w formacie PDF ]
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.Thus, ratings were often viewed as just another regulatory requirement.In other cases, good ratings by SEC-approved rating agencies may have fooledsecurities buyers to understate the risk of what they were buying (MBSs, forexample).After the demise of the MBS market, the rating agencies got a bad press.But it should not be forgotten that they were part of a large financial reg-ulatory complex that was designed, structured, and run by government.Defending his company before the SEC, a Moody’s executive made anveconnect.com - licensed to ETH Zuericextraordinary statement:.palgraRating agencies are staffed by ordinary people with families to support andbills to meet and mortgages to pay.Government regulators are inadvertentlyom wwwsubjecting those people to extraordinary pressure, and share accountability forany scandals that may result.34The statement is extraordinary not by what it says, which is pretty obvious,yright material frbut by the implication that government bureaucrats would not be, as “gov-Copernment regulators,” “ordinary people with families to support and bills tomeet and mortgages to pay.” More on this in Chapter 7.For most of American history until the onset of the last economic crisis,banks and other financial institutions had been enmeshed in a tight financial-regulatory complex weaved by the state and the interests it caters to.Theseinterests may be the interests of the bankers themselves, or the interests ofimportant customers as in the case of branching.More than institutions to10.1057/9780230118478 - Somebody in Charge, Pierre LemieuxFebruary 7, 201120:44MAC-US/CHARGEPage-909780230112698_06_ch04The Laissez-Faire Scapegoat●91maximize depositors’ value, writes Charles Calomiris, banks often appear “asa tool of the state.” They were chartered by government (federal or state)to achieve certain goals, of which the financing of the state itself was oftenparamount.35 Still today, one wonders if banking regulations are not partlydesigned to help finance the public debt.Capital regulation grants prefer-ential treatment to government securities as they are considered riskless andrequire no capital; banks are thus incited to use a higher proportion of theirdepositors’ money to buy government securities instead of granting privateloans.Before the recent economic crisis hit, banks were so tightly regulatedthat one might be forgiven to wonder if there were still private organizationsin the strict sense of the term.A Phantom DeregulationveConnect - 2011-04-01When the first signs of an economic crisis appeared in 2007, banking andalgrafinance were under the constant surveillance and tight regulation of a host ofh - Pregulatory bureaus.The Federal Reserve System (Fed), the Federal DepositInsurance Corporation (FDIC), the Comptroller of the Currency, and theOffice of Thrift Supervision (OTS) were the main banking regulators.Tothese must be added other less important but nonetheless active regula-tors: the Commodity Futures Trading Commission (CTFC), the NationalCredit Union Administration, the Federal Housing Finance Board (FHFB),the Farm Credit Administration, and the Financial Crimes EnforcementNetwork.In 2007, the regulatory budgets of these organizations stood at$2.1 billion (all values in constant 2000 dollars).If we except the FDIC,veconnect.com - licensed to ETH Zuericwhose regulatory budget oscillated and declined between 1997 and 2007,from $750 million to $478 million, the trend in virtually all other banking.palgraand finance regulatory bureaus has been straight upward.The global pictureis a brisk increase from about $200 million per year in 1960 to $2 billion perom wwwyear starting in the mid-1990s up to 2007.The 12-year plateau from 1995to 2007 must not hide the fact that over 47 years from 1960 to 2007, theregulatory expenditures in finance and banking had been multiplied by 11in constant dollars, for an annual rate of growth of 5.2 percent per year.36yright material frA plateau is not deregulation.This growth factor of 11 over the 1960-2007Copperiod is exactly the same we have calculated for total regulation (excludinghomeland security) in the previous chapter.Banking and finance regulationgrew in step with other regulations.Could it be argued that regulation has increased less than the growth offinance and that, in some way, regulatory intensity has decreased? This isnot what available data show.From 1960 to 2007, the proportion of financeand insurance in GDP has more than doubled, from 3.6 percent to 7.910.1057/9780230118478 - Somebody in Charge, Pierre LemieuxFebruary 7, 201120:44MAC-US/CHARGEPage-919780230112698_06_ch0492●Somebody in Chargepercent;37 which is far from the 1,000 percent increase (multiplication by11) in constant-dollar regulatory budgets.Could it be that the growth in theshare of finance combined with the growth of GDP account for the expandedregulatory budgets? No more.Using the BEA quantity index of financial ser-vices and insurance, we can calculate that the production of real insurance andfinancial services has grown by seven times from 1960 to 2007,38 still muchless than the factor of 11 for the multiplication of regulation.The only seri-ous argument that could be made is that, during the plateau of total bankingand financial regulation between 1995 and 2007, the production of financialservices has increased by 58 percent, meaning that, in some sense, regula-tion per “unit” of financial service has decreased during these ten years.Butrecall that the plateau occurred after a tripling of constant-dollar regulatoryexpenditures from the beginning of the 1980s to the mid-1990s.veConnect - 2011-04-01If there is no smoke without fire, where does the idea come from thatAmerican finance had been recently deregulated? There was some mod-algraest deregulation, which consisted in opening the banking industry to moreh - Pcompetition.This deregulation took four forms [ Pobierz całość w formacie PDF ]