Category Archives: comment competition

Has Anyone Taken Responsibility For Anything? (Weekend Comment Competition)

Posted on August 15, 2009 by | 116 Comments

With the anniversary of the Lehman-AIG-rest of the world debacle fast approaching, it seems fair to ask: Who accepts any blame for creating our excessively crisis-prone system?

Friends and contacts who work in the financial sector freely discuss their participation in activities they now regret.  But where is the mea culpa, of any kind, from a public figure – our “leadership”?

I suggest we divide the competition into three classes.

  1. Policymakers who now admit that any of their actions or inactions contributed to the Great Credit Bubble.  Blaming China gets a person negative points; this may hurt Fed officials.
  2. Private sector executives who concede they made mistakes or misjudged the situation so as to lose a lot of Other People’s Money.  Blaming Hank Paulson also earns negative points (too obvious). Continue reading →

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Who Is Too Big To Fail? (Weekend Comment Competition)

Posted on August 1, 2009 by | 92 Comments

In 2004, Brookings  published “Too Big To Fail: The Hazards of Bank Bailouts” by Gary Stern and Ron Feldman (paperback edition 2009).  There is a great deal of sensible thinking in this book, as well as much that now seems prescient – particularly as they have been presenting and publicly debating these ideas at least since 2000.

Some of it also seems a bit dated, but in an interesting way that tells us a great deal about how far we have come.

On the basis of their qualitative assessment, reading of the regulatory tea leaves, and a deep understanding of the available data, Stern and Feldman construct several lists of banks that may be considered (in 2004) Too Big To Fail.  The most interesting names and numbers are in Box 4-1 (scroll to p.39 in this Google Books link) (update: or look at this pdf version), entitled Organizations Potentially Considered Large Complex Banking Organizations.

Here’s this weekend’s competition. Continue reading →

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Design A Country Rescue Package Here (Comment Competition)

Posted on May 25, 2009 by | 60 Comments

Here’s your Memorial Day assignment.  You have been called to the table for top-level policy discussions in a large monetary union.  One of the bigger countries in this union has a serious problem.  Their exports are down slightly and there are some longer-run structural issues, but the immediate issue is (1) a housing bubble just burst, resulting in a big fall in tax revenue, (2) the political system seems paralysed, i.e., cannot raise other revenues or cut spending in any sensible fashion, and (3) the market for this government’s debt appears likely to turn very sour.  Sounds like a classic fiscal crisis.

Here are your possible recommendations: Continue reading →

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Peer Steinbrück’s Peers (Weekend Comment Competition)

Posted on May 16, 2009 by | 43 Comments

Everyone has their favorite politician.  Mine is Peer Steinbrück, Germany’s Minister of Finance.  In terms of having inappropriate – but revealing – things to say at just the wrong moment, Mr. Steinbrück is world class.

This week he blasted the US bank stress tests as worthless.  Back in October 2008 he famously denied there was any problem in the European banking system, shortly before the G7/IMF weekend that culminated in European bank rescues.  And in early 2008 he and his subordinates castigated the IMF for suggesting that Germany and the eurozone could experience even a mild slowdown – have you seen the latest data?

This comment competition is straightforward.  Find the politician (or other leading public figure in any country) with the most untimely quote of the past 18 months.  We’re looking for hubris and denial, preferably 24 hours before an abrupt policy U-turn – so please indicate the precise context that makes the quote appealing.  If your choice is Peer Steinbruck, pick his most perfect moment.

By Simon Johnson

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“Nationalization” (A Weekend Comment Competition)

Posted on May 9, 2009 by | 73 Comments

Writing in the Financial Times on January 27th, 2009, Peter Boone and I expressed our opposition to bank nationalization in no uncertain terms,

If you want to end up with the economy of Pakistan, the politics of Ukraine, and the inflation rate of Zimbabwe, bank nationalization is the way to go.

Most others who recently advocated a managed bankruptcy process – or FDIC-type intervention – for big banks (with or without the injection of new government capital) were careful, at least initially, to avoid using the word nationalization.  And many took pains to explain in detail why their proposals were quite different from nationalization.

But at some point this became a debate in which informed bystanders perceived the sides as being for or against “nationalization” - a semiotic transition that has obviously helped the big bankers, at least in the short term.

This weekend’s comment competition is in two parts.  Who first made “nationalization” the central word for the U.S. bank discussion?  And who was most influential in establishing that the national debate be defined in these terms?

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Ponzi Schemes Of The Caribbean (A Weekend Comment Competition)

Posted on May 2, 2009 by | 91 Comments

The IMF has just released a new working paper, with more detail than you likely ever wanted to know about how Ponzi schemes work – particularly in and around the Caribbean.

Ponzi schemes are everywhere and, at least in some environments, new versions arrive frequently.  But why are they so hard to prevent and shut down once they appear?  The paper contains some strong hints, albeit couched in very diplomatic language.

The comment competition is: what, if anything, does the failure of governments to shut down blatant Ponzi schemes imply about the prospects for a potential “macro-prudential” system/market-stability regulator implementing cycle-proof rules in the United States?  Is there a better way to prevent the kind of behavior that led to our current financial crisis?

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Who Had This Good Idea First? (A Weekend Comment Competition)

Posted on April 18, 2009 by | 38 Comments

In early February, James proposed that bankers’ bonuses be paid out in “toxic assets” – after all, the industry was arguing that these would definitely rebound (“it’s just a liquidity problem”) and that their “true” value was substantially above current market value.  The idea was well received by our readers but not so much by the banking or insurance industry.

Someone quickly pointed out that – back in December – Bloomberg reported Credit Suisse would actually use a version of the same idea.  And, in the whirlwind of the fall, I now vaguely remember this same point coming up even earlier in some bigger discussion.

So in the spirit of proper attribution (also because a reader asked and I’d like to know the answer), here is our first ever weekend “comment competition”.

Who really originated this (very good) idea, either in private discourse or – easier to document - in a public comment, blog post, corporate document, or the like?  We’d also welcome updates on where any form of this idea is being used in practice.

By Simon Johnson

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