Via the Baseline Scenario (hattip to commenter on this blog).
In larry's Ely Lecture in 2000, he said "[I]t is certain that a healthy financial system cannot be built on the expectation of bailouts..."
Yep, that's why Lehman failed, they just knew they'd get bailed out.
The basic problem with worrying too much about moral hazard is this: suppose I wanted to prevent you from doing some kind of bad behavior, such as eating candy bars. As punishments, you could be fined $100, or have your house blown up with a nuclear weapon. Of course, a $100 fine is probably enough to get you to not eat candy bars if you can help it, w/ the added benefit that it won't also have lots of collateral damage. This isn't a great analogy for finance, but most firms weren't really aiming to go bankrupt and I don't think getting bailed out really enters into their thinking about how they trade. Regulating pay and higher capital requirements would do much more to alter behavior...
Termites in Your Cabinet
9 hours ago
It seems really interesting to me. I am bit curous to read the larry's Ely Lecture. Can you post it or give me the link from where I can read it.
ReplyDeleteGood point on the pre-bailout Wall St mentality; however, it's now relevant. Due to Summer's damage, which might describe so much of his work.
ReplyDeleteThe reality of course is actual much more damaging to the neoliberal/neoclassical ideas. It seems to have come down to the fact that the people making decisions in these firms were very rational, and figured that "Heads I'm rich, tails I get a golden parachute" deals were optimal. For them.
The stockholders didn't know, and probably had no way of knowing; the various market participants (accounting firms, rating firms) were totally involved in the corruption and lies.
It's true that most firms don't do business believing that they will need to be bailed out one day (and the bailouts are usually onerous in some way, e.g. Bear Stearns at 10, the banks rushing to repay TARP). However, the possibility of bailouts can still affect behavior at the systemic level - make firms do things they wouldn't do otherwise, even if they consider themselves to be safe. For example: when Lehman went under, one of the money market reserve funds had invested in Lehman bonds and would "break the buck", which was feared to lead to a general run on money market funds - so the Fed stepped in and guaranteed it. Another example: lots of financial firms knew that CDOs, debt-laden firms, etc were risky. So they did the prudent thing and bought some insurance in case things went wrong... from AIG. If they knew that their source of insurance itself had a nontrivial risk of failure, maybe a whole range of activities would become non-insurable and hence not take place.
ReplyDeleteIt used to be that applying for business cash for a smaller in the know was fairly straightforward. You'd pay a visit to your local friendly banker and talk about your business needs. You'd discuss what you needed and they would help with financing a business loan - yours, to be exact. Then, the financial crisis hit, and banks closed ranks and decided that loans for small business were too risky.
ReplyDeleteHome improvement loan is tailored for the UK residents who wish to make improvements in their home. Loan term and the rate of interest on the home improvement loan vary from lender to lender. Estimate the cost that will be incurred in undertaking the home improvement project before you start searching for the best home improvement loan deal. Read the article to learn how a home improvement loan can help you make it easier for you to make the desired changes. Construction Office Manager Job Description
ReplyDeleteNew program for private student loan pays back 100% of your entire debt, this student loan forgiveness program is limited to a select number of citizens per year. It gives people to opportunity of non repayment of loans. Payday Loans Mobile
ReplyDeleteIt used to be that applying for business cash for a smaller business was fairly straightforward. You'd pay a visit to your local friendly banker and talk about your business needs. You'd discuss what you needed and they would help with financing a business loan - yours, to be exact. Then, the financial crisis hit, and banks closed ranks and decided that loans for small business were too risky. effects
ReplyDeleteThis article tends to provide strategies and means for entrepreneurs to start a new business and at the same time, suggests improvements for existing businesses. For existing businesses, this article has information on how to make them more efficient. For starters, all the necessary steps are provided. Corporate Service Provider Dubai
ReplyDeleteLocal search is the use of modified internet search engines that requires the people to submit searches against an arranged database of local business lists. Typical local searches include not only information about "what" the visitor is searching for but also "where" the information lies. Local business directories are mainly search engines which hold all the businesses that are owned by people in a certain area and are categorized into different types. hours calculator add
ReplyDeleteLearn about the fantastic and incredible benefits of marketing your business using articles. Article marketing is considered one of the most powerful and cost-effective ways to increase your business sales and profits. Using articles you can not only increase your revenues but also be seen as an expert in your field. In addition, articles are used by savvy business owners to enhance their reputations in their communities. Read this article to learn how article marketing can help your business. Local News Feed & Groups
ReplyDeleteBusiness is a tough game. Continually we need to operate in three areas to ensure we produce consistent outcomes. The businesses we work with are challenged to: Curtains Blinds & Shutters
ReplyDeleteClose to the end of summer 2008 I bought a used bicycle. The bike I choose was a 2006 Giant Anthem 2 and I rode it as often as I could before it started to snow. Now that spring is coming I thought it would be a good time to review the Giant Anthem 2 for anyone out there that might be in the market for a really good used mountain bike. bafang bbshd mid drive ebik
ReplyDeleteLearn about the fantastic and incredible benefits of marketing your business using articles. Article marketing is considered one of the most powerful and cost-effective ways to increase your business sales and profits. Using articles you can not only increase your revenues but also be seen as an expert in your field. In addition, articles are used by savvy business owners to enhance their reputations in their communities. Read this article to learn how article marketing can help your business. http://draftss.com/blog/8-tips-for-writing-a-great-design-brief/
ReplyDeleteUAN or Universal Account Number is essential for you to access your PF records and ensure all your savings are being credited to your account. Accessing the UAN Member Portal at www.epfindia.gov.in through your UAN will help you simplify the various tasks that otherwise would have meant visiting your local Employees’ Provident Fund Organisation or EPFO office. EPF India Guru
ReplyDeleteThe place of entrepreneurial competence in any business can't be over stressed. There are some basic entrepreneurial competences that an individual entrepreneur must have and practice with consistency to ensure successful business. Some of these competences include financial management, communication, time management, human resources management competence etc. barclays public adjusters
ReplyDeleteIn order for any business to be successful, you must put ethics first and foremost. This means staying with what really works and staying away from what doesn't work. This isn't as easy as it seams as you will see from the article. However, it can be achieved. مصور مشاريع
ReplyDeleteLearn about the fantastic and incredible benefits of marketing your business using articles. Article marketing is considered one of the most powerful and cost-effective ways to increase your business sales and profits. Using articles you can not only increase your revenues but also be seen as an expert in your field. In addition, articles are used by savvy business owners to enhance their reputations in their communities. Read this article to learn how article marketing can help your business. Carbon dioxide
ReplyDeleteAmazing! This might be a definite of the very useful sites We have ever appear across about this topic. Essentially Fantastic. I am also a specialist in this matter therefore I can easily comprehend your own hard work. App for kiss918 and 918kiss
ReplyDeleteHey, you used to write wonderful, but the last several posts have been kinda boring… I miss your tremendous writings. Past few posts are just a little bit out of track! come on! Autoankauf Gelsenkirchen
ReplyDeleteThis can be just the simplest and best advice I have ever come across about this topic. Thank you for this very useful blog post of yours. Additionally, I enjoy writing articles which has a personal tone incorporated. I feel it makes your reader feel more important and inclined to believe me more. Plus it sounds more real and never coming from a robot. I enjoy making my visitors feel important and special. I want to let them have the best tips on how to cope with important issues such as this. HostGator Mexico Coupon Code
ReplyDeletei appreciate you for blogging!. “Education is a method whereby one acquires a higher grade of prejudices.” by Laurence J. Peter.. http://healthexpertstips.com/
ReplyDeleteIt used to be that applying for business cash for a smaller business was fairly straightforward. You'd pay a visit to your local friendly banker and talk about your business needs. You'd discuss what you needed and they would help with financing a business loan - yours, to be exact. Then, the financial crisis hit, and banks closed ranks and decided that loans for small business were too risky. Nicolas Krafft
ReplyDeleteAlthough my area of expertise is in the Internet Marketing niche, as I was writing this article, I noticed the information would also work for traditional start up businesses as well. You will notice there are no references to Internet Marketing, etc. This is because I also wanted to share this information with anyone who is planning on starting a "traditional, brick and mortar" business. But the information contained here also applies to my friends who opt to go with the trend of online marketing as well. In this article, we focus on the initial planning steps of getting your business up and ready to open. Nicolas Krafft
ReplyDeleteGreat post, I think blog owners should larn a lot from this website its rattling user genial . Caribou
ReplyDeleteAlthough my area of expertise is in the Internet Marketing niche, as I was writing this article, I noticed the information would also work for traditional start up businesses as well. You will notice there are no references to Internet Marketing, etc. This is because I also wanted to share this information with anyone who is planning on starting a "traditional, brick and mortar" business. But the information contained here also applies to my friends who opt to go with the trend of online marketing as well. In this article, we focus on the initial planning steps of getting your business up and ready to open. Best Private Investigator Mississauga
ReplyDeleteLock snapping, as seen on BBC TV and ITV, is a method some burglars use to break into a property? But is it really a problem or are locksmiths making money out of vulnerable house holders? This article looks at the evidence and confirms that locks snapping and replacing your locks with anti-snap locks, really is a must for the security conscious home owner. But be careful, not all door need one fitted and not all anti-snap locks are the same. schlüsseldienst kosten
ReplyDeleteThe Small Business Administration says family-owned businesses account for 90% of all businesses in the US. This number includes huge, family-owned corporations like Mars Inc. and Wal-Mart and top earners like Berkshire-Hathaway. But most family businesses are small ones. The Census Bureau says 28% of small businesses are family-owned, which in turn account for 42% of all small business receipts. Business for sale in Dubai
ReplyDeleteGeneral information on putting a business plan together, groups that help polish rough draft plans and funding sources to consider once your plan is done. This includes marketing, legal basics, expenditure lists, etc. accident attorney palm beach
ReplyDeleteWriting a business plan is essential prior to launching your business. You may think you have all the answers in your head: You know what you are going to do; you know to whom you are going to sell; you know what price points you are looking for, etc. But, if you do not take the time to write it out (in detail), then there is a high probability you will fail. The steps to writing out a business plan, for either an online business or a traditional brick and mortar business, are not that hard. But providing sufficient detail to try and convince an investor is. You should take at least that much interest in your business (and your business plan) even if you are the only investor in your business. After all, you don't want to lose "your investment" in the business, do you? You should take a look at all areas of your business just as if you were investing money in someone else's business. Only then will you know if you have all your bases covered GLD Partners
ReplyDeleteWhere is your small business at now? Do you have a charted plan? Do you get great advise? This article highlights 10 points that will assist the small business mindset of each and every business owner that reads it. IMDB
ReplyDeleteFor a small business to grow into a big business, it needs a loan unless it has exceptional sales and profit margins. A small business owner has quite a few places where he/she can go with a loan request. Banks seem to be one of their options on most occasions. Daniel Gordon GLD Partners
ReplyDeleteAre you confused about what web design software to use to build your own web site? Find out the difference between HTML editor, Web editors, WYSIWYG web editors and site builders? ECommerce Web Design and Development
ReplyDeleteEventually, every entrepreneur realizes they cannot work in their business forever. For most entrepreneurs, this is the time they begin thinking of exit Prabook profiles
ReplyDeleteEventually, every entrepreneur realizes they cannot work in their business forever. For most entrepreneurs, this is the time they begin thinking of exit Prabook profiles
ReplyDeleteording to baseball legend Yogi Berra, "If you don't know where you are going, you will probably end up somewhere else." Yogi's one liners often make me laugh, but they also make me think. His quip reminds me of the importance of having a plan when engaging in any endeavor that will impact our personal situations beyond the immediate here and now. That includes the process of estate planning. Now, I will grant you that Yogi probably wasn't thinking about estate planning when he offered this particular slice of wisdom. Nonetheless, his words are absolutely spot-on insofar as the importance of planning for that day which we will not live to see. As important as having an estate plan is for all of us, it is of even greater importance for the small business owner. I think it is no exaggeration to say that thoughtful estate planning is an essential component of every small business owner's overall business plan. Personal assistant
ReplyDeleteThis article aims to support the people who want to find out how to become a private investigator. By going through this article one would be able to know some tips to become a good investigator. undercover investigators
ReplyDeleteThere can be different instances in life that you will need to conduct people search. For example, a family member or a relative may immediately disappear and tries really hard to hide from all family members. In other instances, there may be others who may try to run away from their financial responsibility for a company that renders them service or sells them some products. In both cases, you really should conduct a people search so you could track the missing person without much trouble. missing person private investigator
ReplyDeleteBusiness card printing is a classic marketing strategy that one would think would always be successful. But if you don't know the ins and outs of this promotional component, you may be wasting your time creating business cards. In this day and age, business card printing is much more than a way to swap contact information; it's a way to make a statement for your company. canvas tote
ReplyDeleteIn 1776, Scottish economist and philosopher, Adam Smith wrote the masterpiece, 'The Wealth of Nations'. In this piece, I explain the new rule of Technology of Nations. Mac Computer
ReplyDeleteVery good points you wrote here..Great stuff…I think you’ve made some truly interesting points. buy verified Perfect money account
ReplyDeleteAny business, whether it is home based or, a large enterprise that employs several individuals, choosing the best broadband deals would go a long way in helping the owner of the business save a great deal in terms of the money as well as the time invested. Irrespective of the nature of the size of the business venture, the number of employees that it employs or the genre of the business, it would need a phone as well as an Internet to operate and function these days. It becomes imperative that business owners thoroughly analyze the existing market and only... Virtual assistants
ReplyDeleteThis article assists individuals considering opening a small business. Several topics are covered, in the form of questions that need to be answered, and potential solutions to those questions. DUI Attorney Vancouver WA
ReplyDeleteDergh.com is a social networking website that provides a safe platform for everyone. Our mission is to help people find and share anything from topics to messages. Dergh.com supports public and private messaging, profiles, pictures, search, notification, multimedia, polls and much more social networking
ReplyDeletePreparing yourself for 'going into business' is all about having an idea, researching the idea and drawing up a business plan. Getting this right is vital for your future small business success. 출장안마
ReplyDeleteThe Benefits of an Online Business. A list of 8 benefits of starting your business online. If the entrepreneur deep down has been calling out to you, you might want to consider an online business to save on start up costs as well as cash in on a number of other advantages. 출장
ReplyDeleteThis article provides over 50 tips that you can apply when playing Halo 4 War Games. My advices ranges greatly from how to best utilize power weapons to how to maximize the effect of your grenades. I further discuss in detail how to create the optimum loadout for War Games and how to gain experience with maximum efficiency. Experienced and inexperienced players alike will both benefit greatly from the strategies and tactics that I present in this article. 플렉스홀덤
ReplyDeleteThere are few business credit building companies out there, however, those that are out there are taking advantage of the lack of knowledge from the general public regarding business credit and how to get a business loan. DON'T LET THEM RIP YOU OFF! acim free book online
ReplyDeleteCash is the lifeblood of a business. No business owner wants to see their business struggling because of lack of funds or in debt due to mismanaged finances. What they want to see is a regular flow of profit but this is easier said than done. a course in miracles
ReplyDeleteOnline directories can be quite beneficial for startups and small business firms. Business owners just need to understand how online business directories work. Online directories are site submission services which allow businesses' sites to be added to particular categories where the websites become easy for interested visitors to search. david hoffmeister books
ReplyDeleteThere are few business credit building companies out there, however, those that are out there are taking advantage of the lack of knowledge from the general public regarding business credit and how to get a business loan. DON'T LET THEM RIP YOU OFF! acim authors
ReplyDeleteGood day, i am doing research right now and your blog really helped me. concealed handgun license texas classes
ReplyDeleteHey dude, what kind of wordpress theme are you using? i want it to use on my blog too “ 해외축구중계
ReplyDeleteDergh.com is a social networking website that provides a safe platform for everyone. Our mission is to help people find and share anything from topics to messages. Dergh.com supports public and private messaging, profiles, pictures, search, notification, multimedia, polls and much more. connect with people
ReplyDeleteMany loan options are provided by lenders/credit providers to business owners. You can obtain commercial bill facility, overdraft facility, line of credit, etc. But before you apply for a business loan, make sure that you prepare a business plan. It will be of great help in choosing the right finance product. cara cek imei iphone
ReplyDeleteCredit control is important in a business especially for small businesses. This means that every small business should ensure that it collects its outstanding invoices. Some small businesses let their uncollected invoices accumulate which ultimately affects their cash flow and also the performance of the general business. متجر القط العسيري
ReplyDeleteI just put the link of your blog on my Facebook Wall. very nice blog indeed.,’-”, Psykedeliskbutik.com
ReplyDelete