Before the The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, what economists/analysts were in support of a loosening of requirements.
- Peter J. Wallison (AEI)
- Norbert Michel and Salim Furth (Heritage)
- John Allison (Cato), Alex Pollock (R Street Institute), hearings (part I) [hearings (part 2)]
and in 2018:
- In their official capacity, authors of the 2018 Treasury Report “A Financial System that Creates Economic Activities”.
I welcome additional names with links.
A primer on the legislation, from Vox in 2018.
If you relax bank regulations, then the risk of bank failures probably will go up, all else equal. Most economists wouldn’t dispute that. The question is whether the expected benefits of deregulation exceed the expected costs or not.
It’s like if you want to avoid all car accidents by putting a giant metal spike in the middle of everyone’s steering wheel. You might eliminate car accidents, but it will also make people drive too safely.
This argument is the cost-benefit argument for all regulation, but requires evidence before it can be put to use. Dodd-Frank was passed in response to evidence that too little prudential regulation of banking can cause great economic harm. The repeal of much of Dodd-Frank came at the behest of lobbyists who, to the extent they relied in evidence, presented a highly motivated type of evidence.
Finance had become a very large part of national output by the time of the dot.com bubble and the mortgage collapse. Is it obvious that this increased share for finance has increased welfare? I’d be interested in seeing evidence. Absent such evidence, there is reason to think finance should be made less risky to general welfare.
Mnuchin, some AEI dude, a Cato clown, and Heritage? Not exactly the A Team.
Way below Murdoch’s, B.A.’s, and Amy’s standard. Trust me, I watch the show nearly everyday. : )
Compliance is not the same as risk management.
Oh gee – having failed to tell us how the regulators “botched” this, little Stevie has a few more meaningless cute terms. Dude – you do not get basic monetary economics so could you please butt out?
And the risk is Fed policy, not corporate management, in this case.
Nonsense. You’re spouting unsubstantiated guff.
The Fed was part of a riskier environment, but the three banks which have failed or announced closure have all had serious problems. Bank management has to take interest-rate risk into account. These guys failed at it. Bank management also has to take other forms of risk into account. They failed at that, too.
which is why I endorse saving the depositors, but penalizing bankers so they cannot participate in banking activities in the future. i don’t consider depositors as investors in the bank. sure, they are looking for the best interest rate, but people do not choose a deposit bank based on the bank balance sheet. and I am not sure that is what we should expect of depositors in the future. you can get more and safer return in a one month treasury. but investors and management should be aware, and also should pay a price. if regulations are reasonable, then few banks will reach for yield in a way that is deceitful to the depositor. the svb episode illustrates how this should reasonably play out. most regional and small banks are run by bankers who want to keep that cushy job for a long time. most of them will not risk that for a little more yield. imo.
Do you have any idea WTF you are babbling about? Of course you do not. So stop wasting our time with your little tweets.
Steven, I am not sure why you want to lay blame on the fed? the whole business of commercial banking is to arbitrage the fed. you are basically saying that is too much for a bank to undertake. foolish. they have a job to do. simply did not do a good job. they were fired and replaced with new workers. as it should be. you play the hand you were dealt, not the hand you wish you had. we were dealt a rising interest rate hand. many others played it without losing.
Peter Wallison is the one who really gets under my skin. He works at being an A-hole of the highest magnitude. I try not to think of that being as much as I can, as I go up to rage mode pretty quickly.
OK I decided to read his piece but I stopped after this:
t is important to understand two significant things about Dodd-Frank:
It is primarily responsible for the historically slow recovery of the US economy since the 2008 financial crisis, and It was completely unnecessary.
Enacted hurriedly, Dodd-Frank misdiagnosed the financial crisis. Without any serious investigation of what caused the crisis — or relying on an ideologically driven desire to control more of the financial system — the Obama administration and Congress assumed that the crisis was caused by insufficient regulation of the financial system, primarily Wall Street.
Gee – most economists note state fiscal austerity was the reason why the recovery was slow. But not the Nobel Prize winners at AEI who supported this austerity.
Deregulation did not cause the Great Recession financial meltdown and Dodd-Franks was unnecessary? What is the clown smoking? Damn!
you write what you are paid to write, even when you know it is nonsense.
Mike Konczal’s thoughts on Peter Wallison:
https://rortybomb.wordpress.com/2011/05/18/peter-wallison-discusses-fannie-and-freddie-for-the-american-spectator-or-where-are-the-fact-checkers/
https://rortybomb.wordpress.com/2011/07/14/the-fcic-investigation-wallison-on-the-gses-and-the-conservative-echo-chamber/
I still miss the old “rortybomb” blog. One of the best finance/economics blogs ever. Konczal is at Roosevelt Institute now. If I’m not too sauced later tonight I will try to compile a list of links of folks (leaning to economists??) who were/are anti bank regulation. Is it possible to surf for drab economics links while listening to “Mastodon” etc blare loudly into your earbuds, while half sauced on cheap wine?? Social experiment on the dregs of humanity starting later tonight.
The 2nd AEI fluff piece states:
‘Using this procedure, the data show that the spread between the bank prime lending rate and the 90-day CD rate increased approximately 22 basis points. That is, after Dodd–Frank implementation began, the spread was 22 basis points higher than it was from 2000 to 2006.’
Wait – does any really think the prime rate is an appropriate measure for the cost of borrowing? Seriously. Now I have my doubts about any AEI procedure but a 0.22% increase in the prime rate created a slow economic recovery? Come on dudes – I thought AEI had higher standards than that. But maybe not.
Following up on this dumb AEI claim that a 0.22% increase in the prime rate was caused by Dodd Frank which lead to a weakening of the economic recovery:
(1) Dodd-Frank was passed in 2010;
(2) the prime rate stayed at 3.25% for all of 2011 to 2015, which was about 3% above the 3-month Tbill rate for this entire period.
(3) the prime rate traditionally was 3% above 3-month Tbills before the Great Recession.
So WTF are these AEI clowns trying to pull here? Maybe they should go into selling snake oil.
Oh wait, this is the wrong list, right??
https://nationalcouncilofchurches.us/open-letter-to-vice-president-pence-members-of-congress-and-the-cabinet-calling-for-the-removal-of-president-trump-from-office/
Wait now, I’ll find the list I’m looking for : )
that was January 8, 2021. just curious, how many of those folks who signed on would deny such a letter today? based on the number in congress who changed their minds under duress, I would guess quite a few. which is sad.