Monday, March 4, 2013

Bonus cap legislator, Sharon Bowles: 'woman' does not make her an 'outsider'

Sharon Bowles, Lib Dem MEP for South East England, was remarked has one of 100 people to watch by Times. We have been watching since prior to this bombastic announcement.

Recently, she advertised herself as a 'woman and outsider' in the race for governor of BOE. The outcome? She was ousted. But more to the point, as we discuss below, being a woman does not make her an outsider.

All matters pertaining to EU financial regulation and the ECB come to the attention of the committee of the EU Parliament she chairs, known as ECON.  Latest to date, the cap on banker's bonuses:
Erudite? No, flawed.

If it cannot limit total pay, then total pay will remain unchanged, courtesy of complacent regulators—that's what they're known for, and because the business of banking—Obama recognizes it—is to 'find loopholes'.

Then what's the point?

Friday, September 14, 2012

Banking union fallacies 5 - DG MARKT complicit in capital controls?

According to the FT, Mari Draghi claims that, in response to the sovereign debt crisis, national supervisors have been imposing capital controls on the banks in their jurisdictions. Daniel Gros from CEPS—'who developed original plans for EMU—warned against a similar scenario to underscore 'national bias' in financial regulation.

This type of argument is supposed to promote the banking union in general, and ECB supervision of banks in particular (ECB-Watch).

Questioned on Draghi's allegation, DG Jonathan Faull was kind enough to refer us to a DG MARKT document dated February 2012 on capital controls monitoring. However, there is nothing in this document corroborating Draghi's claim, and no indication, therefore, that the infringement is being dealt with.

DG Michel Barnier's silence on this Single Market violation is strange. So strange, in fact, some would be well inspired to bring the matter to the EU Ombudsman if DG MARKT persists in ignoring Draghi's allegation national supervisors breach Treaty rules [1].

Monday, September 3, 2012

National Post makes hasty generalization from EZ to QC separatism

QC separatism is an interesting hypothesis in monetary economics.  David Frum makes some valid points about its consequences while staying within a CAD union, given the hindsight of EZ’s failure (National Post). But he overplays it by tying the fates of failing countries in the EZ to that of QC under that option. Having its own currency, OTOH, is presented as yet another calamity. Neither of these doom predictions are fatalities because QC  starts from a reasonably good standing  and its options are open.

Friday, August 17, 2012

Musings in central banking 3 - Challenge to MMT (continued)

I respond here to Mitch Green's reasons (methodological) for rejecting my challenge to MMT and his invitation to 'try this again, but do so with good assumptions, a realistic model'. I took up his invitation to try again, although without altering assumptions. I show why the challenge is crucial to validate a key claim by MMT and why my model assumptions suffice for that purpose.

Banking union fallacies 4 - Draghi on capital controls: fact of fiction?

Wolfgang Münchau tells us that because we can't impose capital controls by Treaty, the only way to fight bank runs is through an EU-wide pooling of deposit insurance, one of the pillars of the banking union.

Mari Draghi, OTHO, tells us that 'national supervisors' are imposing capital controls on the banks in their jurisdictions to underscore 'national bias' in financial regulation. A similar scenario was imagined by Daniel Gros from CEPS—'who developed original plans for EMU—in promoting a banking union.

Are national supervisors breaking the law, or are Gros and Draghi bending the truth to make the case for  the ECB to take over banking supervision?

Tuesday, August 14, 2012

Banking union fallacies 3 - Eviction of EBA establishes ECB as an empire

Even the timing of the Banking Union spells disaster. Proposal to be announced 9/11, says WSJ (Source). Discussed in this post, the ECB taking responsibility for banking supervision.

Cast: Sharon Bowles (EU Parl), Mario Draghi (ECB), Nicolas Véron (Bruegel)

Saturday, August 11, 2012

Musings in central banking 2: challenge to MMT

I recently wrote down my understanding of central banking, taking the reader from pure banking (PB) to the system we currently have—interbank rate set through open market (OM)—via the simpler set up in which the CB intervenes through the discount window (DW). The purpose was to demystify some aspects surrounding 'printing press' which tends to be used indiscriminately. I took aim at MMT's thesis that the 'government is not revenue constrained'. I am just an amateur, it should be easy to find flaws in my reasoning. MMT followers were not forthcoming in taking up my first challenge. Let's give it another try.

Monday, August 6, 2012

Banking union fallacies 2 - ECB, last repository of faith

Paul De Grauwe, who is an eminent economist on EMU, thinks the ECB can save the Euro (VoxEU), and the idea is making headway (Spiegel).  At the same time, Barnier promises a banking union for 2013, that pools deposit insurance across all EZ states and puts the ECB in charge, its greatest expansion of power since its creation (Libé). Some pointers to help understand and questions about whether the taxpayer is getting a good deal out of it. This posts refers to our tutorial on central banking, 'Fed's printing press, fact vs fiction' (ECB-Watch).