"Political connections play an important role in a firm's access to capital," Sosyura, a University of Michigan assistant professor of finance, said in a statement. banks that spent more money on lobbying were more likely to get government bailout money, according to a study reported by Reuters. I also hope they find a way to preserve some space for social interactions involving money that aren't "just business" and where, indeed, it's sometimes worthwhile to make an non-mandatory personal sacrifice for no other reason than because its the "right thing to do".ĥ. I hope it doesn't spillover, baby-with-the-bath-water-like, and create a generational animosity for a free market economy and open society in general. Perhaps that's for the best, moral intuitions being supportive of certain beneficial survival instincts in the modern dog-eat-dog financial world where ordinary folks need be constantly on their guard. I'll guess that the content of these lessons will not include much sense of moral obligation or sympathy towards banks. I wonder what new moral lessons these men, indeed our whole generation, will now teach our children and grandchildren. Then they questioned whether they were just being "suckers" and if there really was any kind of moral question at all given what was happening in the world around them. They started out with an inclination as to what the right thing to do was, and then they were unsure. The whole moral universe, in regards to debt, has been overthrown for these good and righteous men with whom I went to war. It gives you a sense of the betrayal many in America feel. Waldman then quotes from a letter he received from a soldier about officers returning home from Iraq and Afghanistan to find they were under water and their banks had been bailed out. In order to strengthen norms I consider crucial, I hope transgressors face legal and social consequences (strategic default and reduced shame attached to default) that will alter their behaviorĤ. I think that banks violated a great many norms of prudence and fair dealing in their practices during the credit bubble, and that they violate the fundamental norm of reciprocity by fully exploiting their own legal rights while insisting that borrowers have a moral obligation not to exercise a contractual option. We both want to see norms we consider valuable enforced. Steve Waldman makes the case for default here, arguing against Megan McArdle's now infamous piece about a 'new breed of deadbeats' who default : I think that underwater homeowners ought to walk away from their loans for the very same reason McArdle want us to consider them jerks for doing so. It's known as the 'strategic default' movement. The thinking seems to be that there was no moral hazard for banks who were bailed out so why should there be any moral hazard for borrowers from those same banks. Ultimate revenge - There seems to be a growing movement among American taxpayers who are in over their heads with housing and other debts to simply walk away from their debts and force the pain back on the banks. Second, banks will soon have a VERY big equity hole! Haven't seen any analysis of how the new Basel bank capital calculations would affect US bank regulatory capital, but if Credit Suisse's back of an envelope calculation is right for Eurobanks (they will need EUR 1.1 Trillion of extra capital of one sort or another), then a crude read-across is that American banks need another US$400Bn of capital, of one sort or another.ģ. Now, the conspiracy theorist interpretation of this is that Citi or US Treasury got a whiff of the Basel III rulings, tried to get a sale away, (before investors realised that if they bought in they'd be diluted yet again as some point by the fundraising required when the DTAs get binned), and then got snubbed by equally well informed investors on Weds. Thursday: Basel II bins deferred tax assets as regulatory capital, so Citi face the prospect of raising another US$40Bn in addition to the shares they didn't sell on Monday. Richard Smith, a capital markets and IT consultant, has a few thoughts at Naked Capitalism. 'Bugger we've been Basled' - The impact of the Basle III changes to regulatory capital requirements earlier this week and Citigroup's failed capital raising is finally dawning on a few people. Hillary points out that once the rights issue costs are taken into account South Canterbury made a NZ$3.92 million loss. A small profit? - David Hillary at Lost Soul fisks a claim by South Canterbury Finance that it made a profit on the shares it sold in PGC. I'll be back on January 18 with my first Top at. I welcome your additions and comments below. Here are my Top 10 links from around the Internet at 10am.
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