SIFIs and Sisyphus: The Latest Bank-Regulation Rewrite

By Karen Petrou

Starting in 2010, U.S. regulators erected a pyramid of complex, costly, and stringent safety-and-soundness, resolution-planning, and conduct regulations for the largest U.S. banking organizations that have come to be called SIFIs (i.e., systemically-important financial institutions).  Starting in 2018, the agencies began to demolish the still-incomplete SIFI pyramid, issuing on October 31 two sweeping proposals (here and here) not only to implement new U.S. law, but also to go farther.  Bankers say this is nice, but not enough; critics lambast the proposals as forerunners of the next financial crisis.  Either could be right – the proposals repeat the most fundamental mistake of post-crisis financial regulation:  rules piled upon rules or, now, rules subtracted from rules without even an effort to anticipate how all of the revised rules work taken altogether in the financial marketplace as it exists in the real world, not in a set of academic papers or political edicts. Continue reading “SIFIs and Sisyphus: The Latest Bank-Regulation Rewrite”

How the Other Half Goes Broke

By Karen Shaw Petrou and Matthew Shaw

In our last blog post, we laid out the most telling inequality-data points from an important new study from the Federal Reserve Bank of Minneapolis which for the first time runs from 1949 to 2016 and adds many critical equality measures.  These data show more decisively than ever not only that wealth inequality in 2016 is the worst since at least the Second World War, but also that this is due to who holds the assets that have gained the most.  Since which assets return how much is due now in large part to post-crisis monetary and regulatory policy rather than to market forces and broader macroeconomic trends, it’s post-crisis policy – not forces from beyond – that increasingly dictates U.S. economic equality. Continue reading “How the Other Half Goes Broke”

Disquiet on the Home Front

By Karen Shaw Petrou and Basil N. Petrou

On June 20, FRB Chairman Powell said, “Nine years into an expansion that has sometimes proceeded slowly, the U.S. economy is performing very well.”  Although Mr. Powell noted low labor participation, puzzling inflation, and problematic wage growth, he said that all will come right as long as the Fed stays the course.  No mention was made of unprecedented U.S. income and wealth inequality or of a housing market serving mostly the oldest, wealthiest, and most coastal among us.  Too bad – inequality and the impediments to effective monetary-policy transmission it erects are among the most important reasons that the nine years Mr. Powell cites have seen the slowest recovery in decades in concert with new threats to financial stability. Continue reading “Disquiet on the Home Front”

Baseball Cards for the Equality Game?

By Karen Shaw Petrou

Although the Federal Reserve resolutely rebuffs suggestions – mine included – that it’s exacerbated U.S. economic inequality, the Bank of England has been forced by public outcry to deal directly with its own inequality impact.  Reacting to strong public protest and withering fire from the Prime Minister, the BoE recently released not only a report denying the charges itself, but now also an exculpatory speech by Andrew Haldane, its influential chief economist.  Clearly feeling the heat, the Bank of England has even come up with a way to sell its positive message:  personalized “scorecards” proving to the skeptical citizenry that it’s better off than personal economic problems might lead it to believe.  Continue reading “Baseball Cards for the Equality Game?”

Still Economic Waters Hide Lurking Danger

By Karen Shaw Petrou

On Tuesday, FRB Chairman Powell delivered a strongly-positive statement on the state of the U.S. economy.  Citing factors such as recent wage growth and employment, Mr. Powell is far more worried about keeping the good times going than about how inequitably the good times deliver the goodies across the gaping U.S. income and wealth divide.  This is setting monetary and regulatory policy the same way a diver looking only at a calm, blue surface jumps into a lake and breaks his neck.  Continue reading “Still Economic Waters Hide Lurking Danger”