One the one hand, as the financial crisis gets global, I guarantee that you will see transnational policy being made via the informal global networks that the regulators must now rely upon. On the other hand, with the G-7 statement ("we're taking this seriously!") being pretty small beer, it is worth noting the diversity of regulatory solutions adopted by global - and even European - regulators.
- Britain is taking equity, or partially nationalizing, its banks.
- Germany is doing an American-style maybe guarantees maybe capitalization blend: it is "considering a total bailout plan of €300 billion to €400 billion ($402 billion to $536 billion), which includes state guarantees and the option to get a direct stake in banks. As part of this, the government is mulling recapitalizing financial institutions by injecting €50 billion to €100 billion in capital."
- The IMF is going to make fast loans to sovereigns - good news for Pakistan and Iceland
- Ireland is going to guarantee deposits, FDIC style.
- And the United States still hasn't decided what it is going to do ... so far it has been more deposit guarantees, some purchases, possibly some capitalization, and a case by case approach. Maybe it's all about Morgan Stanley this weekend, but one expects a systemic approach, and perhaps sooner rather than later would be wiser?
- Anyway, we await regulatory harmonization - and we are not seeing it yet.
(Hat Tip: Barry Ritholtz)
UPDATE: At the COB on Sunday, the Times is reporting that the Europeans, after a weekend of negotiating, now claim to be unified. In doing bank rescues at least, and maybe in not going the Irish route on depositors. But as for the rest ... we shall see....
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1. Posted by Halliwell on October 12, 2008 @ 12:02 | Permalink
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2. Posted by fedgovernor on October 12, 2008 @ 15:15 | Permalink
Much ado about nothing that will actually solve the crisis.
As usual, government is trying to solve yesterday's problem by throwing money at it.
Nationalizing banks will merely allow the government to cut out the middleman, and destroy the economy directly, by lending money hand over fist to people who shouldn't be lent to.
How soon after Uncle Sam is making lending decisions will a court decide that equal rights are being violated in lending decisions?
When private business is lending ... the price from one person to the next can be different (based on the negotiating skill of the purchaser). When government is making lending decisions, such pricing is actionable.
The Constitution guarantees me nothing in dealing with GMAC. It affords me equality when dealing with Uncle Sam.
3. Posted by John on October 12, 2008 @ 16:01 | Permalink
I’m confused about the IMF “giving” loans. How much cash do these guys got? I can understand the US handing out loans based on the “full faith and credit of the US gov’t” (I’m assuming they are talking about the Asians having the faith), and England (of course) “Rule Britannia, Britannia rules the seas…” (and all that), and the Germans have all those BMW’s, so there’s gotta be some loot stashes in them Bavarian hills. But the IMF? Who’s backin’ these guys?
4. Posted by David Zaring on October 12, 2008 @ 16:20 | Permalink
I think the IMF has something like 150 billion dollars. And few loans outstanding. They're ready to invest.
5. Posted by fedgovernor on October 12, 2008 @ 18:12 | Permalink
LOL.
$150 billion!
What are they going to buy?
AIG, by itself, has cost that much so far.
The IMF is priced out of this market. It hasn't any real money.
6. Posted by Anna Gelpern on October 12, 2008 @ 19:55 | Permalink
IMF has closer to $300 billion (see http://www.imf.org/external/pubs/ft/survey/so/2008/NEW101208A.htm, click on "borrowing arrangements" at the end for info on General and New Arrangements to Borrow). This is not enough to fix a big economy, but useful for the likes of Iceland, as David said.
7. Posted by David Zaring on October 12, 2008 @ 22:01 | Permalink
Whoa, that is more than I though. That IMF money all comes from members, so it can't just print dollars or whatever. But it is developing country bailout money - it's times like these where the question of who takes on some salience.
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