Tuesday, January 05, 2010

Too Big To Behave?

Meetings finished!

The best session of these meetings (for me, at least) was a panel this morning organized by John Taylor, Ending Government Bailouts As We Know Them. How do you end the "too big to fail" syndrome? The panelists were largely in agreement, made great sense, and the overall message was quite depressing. I especially appreciated Carmen Reinhart (co-author with Ken Rogoff of the excellent “This Time It’s Different” book). Wow, is she cynical (and proudly says so). With each solution she proposes, she essentially says "good luck" when it comes to generating the political will to implement it.

I think all the participants had very clear ideas of what needs to be done and seemed to have not much hope for it happening. Another participant was head of the Minneapolis Federal Reserve; he kept posing scenarios in which a "hypothetical" bank gets away with one or another essentially dishonest thing and no one intervenes to stop it, for example switching back and forth between being an FDIC regulated deposit bank and an unregulated investment bank. I wonder who he could mean?

I’ll have plenty to say on this topic later myself.

For now, the sessions have ended, and I’m about to start the AEA continuing education course in Time Series Econometrics, taught by James Stock and Mark Watson. Somehow I don’t think I’ll be blogging a lecture-by-lecture account.

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