Banks And Leverage

A cyclical recovery has seen sentiment shift on China and some have said that the economy has bottomed out.  Societe Generale's Wei Yao expects Chinese GDP to increase 7.4 percent this year, but thinks there still is a "non-negligible risk" of a hard landing with growth of less than six percent. Remember a hard landing refers to four consecutive quarters of below six percent growth - which is the minimum needed for a stable job market and to avoid "systemic financial risk". 

Banking regulators around the globe are eager to put rules in place that could prevent the systemic failure that nearly sank the world economy in 2008. Much of the regulatory response has focused on adjustments to bank capital ratios, activity restrictions, more supervision and other tools to reduce risk.  But what if we could address the problem of failure itself – and find a more fundamental solution to the crisis?   

Listening to the media await the release of the latest bank stress tests from the Fed, one is reminded that bank supervision is not the first and foremost concern of the central bank.  Froth in the equity and housing markets are seen as better indicators of policy success than job creation or credit expansion.  With the US economy entering another speculative phase c/o quantitative easing, Wall Street is jubilant at the prospect of further capital and loan loss releases by the banks.

After his departure from UBS, Andy Lees went radiosilent while setting up his own research company, AML Macro. We are now happy to be able to bring to our readers' the occasional report from Lees, who has traditionally been one of our favorite macro analysts, and whose insights are usually months ahead of the maintstream. Emerging Markets Unable To Continue The Heavy Lifting AML Macro Limited

By Mike Konczal Hello, all. My name is Mike Konczal, and I'm a blogger on financial reform these days at Rortybomb and the Roosevelt Institute's New Deal 2.0 blog. I'll do my best to keep the financial reform material accessible for a general audience while interesting for those with a deeper background. I'll also lay out arguments for what progressives, conservatives and those in favor of stronger financial reform should fight for in terms of what is currently on the table next week.

Richard Suttmeier submits: We need new heads for US Treasury, Federal Reserve and the FDIC, not Regulatory Reform. Below I review the important regulations that were created, and then ignored by our regulators.