Pam and Russ Martens — Three Critical Steps to Making America Great Again Are Not on Trump’s Agenda

1. M&A rather than IPOs, stock buybacks. Primary investment is lagging. The environment for investment must be addressed.
2. Deregulation for its own sake. Removing bank regulation was a factor in the financial crisis. Regulation needs to be revisited from the perspective of lessons learned.
3. Control fraud and criminogenic environment were promoted by hands-off policy in regulation and oversight. Well-Functioning markets require appropriate regulation and supervision.

Wall Street On Parade
Three Critical Steps to Making America Great Again Are Not on Trump’s Agenda
Pam Martens and Russ Martens

Jayati Ghosh — After neoliberalism, what next?

There are economically-viable, socially-desirable alternatives to the failed neoliberal economic model, writes Jayati Ghosh.

Jayati Ghosh is always worth reading.

Red Pepper
After neoliberalism, what next?

Jayati Ghosh | Professor of Economics at the Centre for Economic Studies and Planning, School of Social Sciences, at the Jawaharlal Nehru University, in New Delhi

ht Ramanan at The Case for Concerted Action

Clint Ballinger — The Banking System We Need

Outline of a proposal.

I am traveling at the moment & this is a rough draft that needs editing – comments greatly appreciated.

Please post your constructive criticism over there and copy your comments here if you wish. 

Clint Ballinger
The Banking System We Need

Tony Wikrent — Michael Lewis: The Book That Will Save Banking From Itself

During my visit with Jon last month, we both agreed that Michael Lewis is one of the best USA writers living. Here is partial list of some of Lewis's books:

• Liar's Poker: Rising Through the Wreckage of Wall Street (1989)
• Moneyball: The Art of Winning an Unfair Game (2003)
• The Blind Side: Evolution of a Game (2006)
• The Big Short: Inside the Doomsday Machine (2010)

The Big Short was the basis of the movie Jon reviewed here a couple months ago; I reviewed the book back in June 2011.

Since the article below was written by Lewis, I overcame my grave misgivings, and decided to post it here. It is a rather detailed review of a recent book by the former governor of the Bank of England (2003-2013) Mervyn King. The books is entitled The End of Alchemy: Money, Banking, and the Future of the Global Economy, and it presents King's argument that nothing has fundamentally altered the financial system's stupidity, greed, and appetite for high-payoff risks, then King's detailed proposal for what governments and financial regulators should do before the next crisis inevitably hits. 

Normally, I do not believe that highly technocratic financial discussions conduce to furthering an enlightened public discourse. Frankly, such discussions are usually a steaming pile of bovine manure. But now that it appears that our sole choice for USA President is Trumpillary, it seems very likely that the best we can hope for in terms of forcing the banksters to behave civilly is exactly the sort of proposal King is putting forward.…

Good read.

real economics
Michael Lewis: The Book That Will Save Banking From Itself
Tony Wikrent

Zerohedge — Bernanke's Former Advisor: "People Would Be Stunned To Know The Extent To Which The Fed Is Privately Owned"

"A lot of people would be stunned to know” the extent to which the Federal Reserve is privately owned, Mr. Levin said. The Fed “should be a fully public institution just like every other central bank” in the developed world, he said in a conference call announcing the plan. He described his proposals as "sensible, pragmatic and nonpartisan."…

The twelve regional federal reserve banks are owned by the member banks in those regions. SCOTU has ruled that they are private institutions.

Specifically, Levin wants the 12 regional Fed banks to be brought fully into the government. He also wants the process of selecting new bank presidents—they are key regulators and contributors in setting interest-rate policy—opened up more fully to public input, as well as term limits for Fed officials.…

The proposal was revealed on a conference call that also included a representative from Bernie Sanders’s presidential campaign, although all campaigns were invited to participate.

The WSJ adds that according to Levin, who knows the Fed's operating structure intimately, says the members of the regional Fed bank boards of directors, the majority of whom are selected by the private banks with the approval of the Washington-based governors, should be chosen differently. The professor says director slots now reserved for financial professionals regulated by the Fed should be eliminated, and that directors who oversee and advise the regional banks should be selected in a public process involving the Washington governors and local elected officials. These directors also should better represent the diversity of the U.S.

Levin also wants formal public input into the selection of new bank presidents, with candidates’ names known publicly and a process that allows for public comment in a way that doesn’t now exist. The professor also wants all Fed officials to serve for single seven-year terms, which would give them the needed distance from the political process while eliminating situations where some policy makers stay at the bank for decades…

As the WSJ conveniently adds, the selection of regional bank presidents has become a hot-button issue. Currently, the leaders of the New York, Philadelphia, Dallas and Minneapolis Fed banks are helmed by men who formerly worked for or had close connections to investment bank Goldman Sachs.

Levin called for watchdog agency the Government Accountability Office to annually review and report on Fed operations, including the regional Fed banks. He also wants the regional Fed banks to be covered under the Freedom of Information Act. A regular annual review hopefully would insulate the effort from perceptions of political interference, Mr. Levin said. 

Zerohedge
Bernanke's Former Advisor: "People Would Be Stunned To Know The Extent To Which The Fed Is Privately Owned"
Tyler Durden

Diane Coyle — The devil take the debt

Mini-review of Adair Turner's Between Debt and the Devil: Money, Credit and Fixing Global Finance .

Given the difficulty of tackling the three drivers of the crisis – a limited supply of land and real estate, income inequality and global imbalances – what does Turner, a former head of the FSA, recommend? His answers are interventionist, suggesting a total rejection of the idea that finance can be left to ‘the market’. “To achieve a less credit-intensive and more stable economy, we must … deliberately manage and constrain lending against real estate assets,” he writes. He also advocates central bank monitoring of credit growth, constraining it when necessary; taxation of land values; taxation of debt to bring its treatment in line with taxation of equity; and raising bank equity ratios and minimum liquidity requirements (a step advocated by every, but every, economist who has given a moment’s thought to the crisis – shocking that the banks have lobbied their way out of this minimal step towards systemic stability).…

The Enlightened Economist
The devil take the debt
Diane Coyle | and a former adviso freelance economistr to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

HRC — My Plan to Prevent the Next Crash

Have at it.

Bloomberg View
My Plan to Prevent the Next Crash
Hillary Clinton

INET — The Future of Financial Reform: Conceiving the Financial System of the 21st Century

Mark Carney, Governor of the Bank of England (BoE) and Chairman of the Financial Stability Board (FSB), may well be the man of the hour. When he gives a speech entitled “The Future of Financial Reform” as he recently did at the Monetary Authority in Singapore, people listen.…

INET
The Future of Financial Reform: Conceiving the Financial System of the 21st Century

Jay Pocklington

Clint Balinger — Endogenous money, MMT, Positive Money, & financial reform

Among the Post-Keynesian groups concerned with understanding and fixing problems that lead to the 2007/8 Global Financial Crisis (GFC) and other ongoing economic problems there are different areas of focus by circuit theorists, Modern Monetary Theory (MMT), Steve Keen’s approach to private debt, and other Post-Keynesians. (MMT, while often with a focus on other aspects of the economy [as L. Randall Wray writes, leading from neo-Chartalist and functional finance insights to fiscal policy] is nevertheless firmly grounded in endogenous money theory). Despite these various approaches having important disagreements and areas of interest all are grounded in reality & therefore their discussions on policy options are coherent and useful, unlike orthodox policy discussions. 

There is another perhaps small but dedicated and often visible group of reformers that focus on the monetary system. Broadly these are the various groups that want to change the monetary system such as The American Monetary Institute (AMI), Positive Money (PM), economists associated with the New Chicago Plan and others. Their relation with the Post-Keynesian groups mentioned above is somewhat complicated, and the key reason involves endogenous money. Before continuing, it helps to divide these diverse money reforming groups into two broad categories:

Clint Balinger
Endogenous money, MMT, Positive Money, & financial reform

Norbert Häring — George Soros‘ INET: An institute to improve the world or a Trojan horse of the financial oligarchy?

The financial oligarchy might also recollect that economics is their most important ally in shaping public opinion and policies in their favor. To prevent a loss of power as it happened hence, they might want to make sure first that economics will not challenge the notion of leaving financial markets mostly to themselves and will continue to downplay the role of money and the power of the financial oligarchy, and of power in general....

So far, the history and the actions of the Institute for New Economic Thinking, founded by George Soros and other members of the financial establishment, are compatible with the hypothesis that it might be a Trojan horse of the financial oligarchy, meant to control the movement for reform of economics. However, despite some limited evidence to the contrary, it is also still compatible with the counter-hypothesis that it is a bona fide effort to push such reform to the benefit of society at large. A restrictive policy of supporting independent initiatives with the same stated goals, and a recent tendency toward the promotion of the less radical reformist ideas make it opportune to monitor the activities of INET with an open but skeptical mind.

Real-World Economics Review Blog
George Soros‘ INET: An institute to improve the world or a Trojan horse of the financial oligarchy?

Norbert Häring | Co-founder and co-director of the World Economics Association

At least INET is better than the Peterson Foundation, Concord Coalition and Fix the Debt, which are quite transparently organized to prevent a repeat of the Pecora Commission, Glass-Steagall, and the New Deal reforms.

TheFinanceLab — Transforming Finance [video]

Transforming Finance
TheFinanceLab
(h/t Lars Syll)

Andrew G. Haldane — Have we solved 'too big to fail'?

The short answer is, "No."

Conclusion, the problems of systemic risk and moral hazard remain unresolved, with banks not only too big to fail but too big to manage.

VOX
Have we solved 'too big to fail'?
Andrew G. Haldane | Executive Director, Financial Stability, Bank of England

Neil Barofsky To Speak to Occupy

Neil Barofsky, author and former prosecutor and TARP Special Inspector General is coming to meet with the Occupy Alternative Banking Group next Sunday, Dec. 16th at 3 PM.

Occupy Wall Street
Neil Barofsky: An Honest Insider Speaks to Occupy
John Snodgrass

Michael Pettis— What is financial reform in China?

On financial repression:

This is very clearly the case for China, as I have discussed many times in this newsletter. Normally under these circumstances we would expect the losers in the system, the depositors, to opt out of depositing their savings in local banks, but it is extremely difficult for them to do so. There are usually significant restrictions on their ability to take capital out of the country and there are few local investment alternatives that provide similar levels of safety and liquidity.

Depositors foot the bill

Depositors, in other words, have little choice but to accept very low deposit rates on their savings, which are then transferred through the banking system to borrowers, who benefit from these very low rates. Very low lending and deposit rates create a powerful mechanism for using household savings to boost growth by heavily subsidizing the cost of capital.

The ones who lose under conditions of financial repression are net depositors, who tend for the most part to be the household sector. The ones who win are net borrowers, and in most countries in which financial repression is a significant policy tool, these tend to be local and central governments, infrastructure investors, corporations and manufacturers, and real estate developers. Financial repression transfers wealth from the former to the latter.

Read it at China Financial Markets
What is financial reform in China?
by Michael Pettis | Senior Associate at the Carnegie Endowment for International Peace, Professor of Finance at Peking University’s Guanghua School of Management, and Chief Strategist at Guosen Securities (HK), a Shenzhen-based investment bank

Lots of good stuff in this post.

Warren Mosler — How to fix the euro banking system

Cross-posted from The Center of the Universe

How to fix the euro banking system
by Warren Mosler
June 1st, 2012

The banks need, and I propose, ECB deposit insurance for all euro zone banks. 

Currently the member governments insure their own member bank deposits and do the regulation and supervision.

 So to get from here to there politically they need to turn over banking supervision to the ECB.

Let me suggest that’s a change pretty much no one would notice or care about from a practical/operational point of view?

The political problem would come from losses from existing portfolios that, in the case of a bank failure due to losses in excess of equity capital, currently would be charged to the appropriate member nations. 

So under my proposal, for the ECB to suffer actual losses a member bank that it supervises and regulates would have to suffer losses in excess of its capital.

And none of the member governments currently think that their banks have negative capital, especially if they assume member governments don’t default on their debt to the banks.

And this ‘fix’ for the banking system would help insure the member governments don’t default on their obligations to their banks. 

The euro zone has three financial issues at this point. One is bank liquidity which this proposal fixes. Second is national government solvency, and third is the output gap. 

They need to allow larger government deficits to narrow the output gap, but that first requires fixing the solvency issue.

The solvency issue can be addressed by having the ECB guarantee all of the member government debt, which then raises the moral hazard issue. 

The moral hazard issue can be addressed by giving the EU the option of not having the ECB insure new government debt and forbidding its banks to buy new government debt as a penalty for violators of the debt and deficit limits of the Stability and Growth Pact.

#OWS Alternative Banking Working Group RFP (Request for Proposal)

Those complaining about lack of demand and proposals from Occupy, here's your chance.

Read it at # Occupy Wall Street
Alternative Banking Working Group RFP (Request for Proposal)

by chris wroth

Jan Kregel & Dimitri B. Papadimitriou — Building Effective Regulation Requires a Theory of Financial Instability

Stepping back and surveying the last half decade's worth of US policy responses to the global financial crisis,what we see before us looks very much like the "piecemeal" and "patchwork" pattern of reform that Hyman Minsky cautioned against in his 1986 book Stabilizing an Unstable Economy. If there ever was any real political space for fundamental reform of the financial system, it has since disappeared, even as the economic wounds left by the crisis continue to fester. The battle to shape the rule-making and implementation process of the 2010 Dodd-Frank Act is ongoing, but Dodd-Frank—indeed, the whole host of policy reactions (and nonreactions) since 2007—is largely undergirded by an approach to financial regulation that is incomplete and inadequate.

Read the rest at the Levy Institute

Building Effective Regulation Requires a Theory of Financial Instability

by Jan Kregel, director of the Levy Institute’s Monetary Policy and Financial Structure program and a professor at Tallinn Technical University, and Dimitri B. Papadimitriou, president of the Levy Institute and executive vice president and Jerome Levy Professor of Economics at Bard College

(h/t Michael Stevens at Multiplier Effect, It's hard to fix what you don't think is broken)

Ann Pettifor interviewed by Renegade Economist

Renegade Economist with Ann Pettifor

Josh Ryan-Collins — Credit is what Credit does

From Berlin to Edinburgh: experts call for control of credit creation to be put at the heart of banking reform

Read it at NEF The New Economics Foundation
Credit is what Credit does
by Josh Ryan-Collins | Senior researcher, Monetary Reform

Dirk Bezemer — Creating a Socially Useful Financial System

Creating a Socially Useful Financial System

Dirk Bezemer | Associate Professor, University of Groningen 

Given at INET Berlin on April 12

Here is the panel discussion after presentation on the subject.

Discussion and Q&A: Creating a Socially Useful Financial System

Here is Dirk's paper — Finance and Growth: When Credit Helps, and When it Hinders