Metlife
What does "systemically important" mean? How tin strength out an institution, per se, hold out "systemically important?" The WSJ coverage of Judge Rosemary Collyer’s determination rescinding MetLife’s designation every bit a "systemically of import fiscal institution:" gives an interesting clue to how our regulators' thinking is evolving on this issue:
"Actively create out residue sheets" is a fancy discussion for "sell assets." So in that place you lot possess got it. "Systemically important" at 1 time merely agency that an establishment mightiness sell assets, because selling assets mightiness lower property prices. "Contagion" together with "systemically important" are no longer well-nigh runs; you lot run across 1 banking concern inward problem together with become accept your coin out of a unlike one. "Contagion" together with "systemically important" is no longer the (false, but plausible) domino theory, that if I default together with owe you lot money, you lot default.
Policy is no longer merely well-nigh stopping runs. Policy is non merely well-nigh stopping whatever large banking concern from failing, or e'er merely losing money. Policy is well-nigh stopping property prices from falling, together with stopping fifty-fifty the little marginal additional autumn inward prices that mightiness accompany 1 large institution's sales. (Except that leverage together with upper-case missive of the alphabet ratios at 1 time strength institutions to sell fifty-fifty if they don't desire to, a delicious representative of contradictory regulatory commands.)
Owen Lamont's classic characterizatiion of policy-maker's mental attitude toward selling short, at 1 time applies to selling at all.
The [Financial Stability Oversight] council argued — bromide alarm — that “contagion tin strength out number when relatively minor direct, private losses movement fiscal institutions amongst widely dispersed exposures to actively create out their residue sheets inward a way that destabilizes markets.”It's non a bromide. It is a revealing capsule of how the FSOC headed past times Treasury thinks well-nigh this issue.
"Actively create out residue sheets" is a fancy discussion for "sell assets." So in that place you lot possess got it. "Systemically important" at 1 time merely agency that an establishment mightiness sell assets, because selling assets mightiness lower property prices. "Contagion" together with "systemically important" are no longer well-nigh runs; you lot run across 1 banking concern inward problem together with become accept your coin out of a unlike one. "Contagion" together with "systemically important" is no longer the (false, but plausible) domino theory, that if I default together with owe you lot money, you lot default.
Policy is no longer merely well-nigh stopping runs. Policy is non merely well-nigh stopping whatever large banking concern from failing, or e'er merely losing money. Policy is well-nigh stopping property prices from falling, together with stopping fifty-fifty the little marginal additional autumn inward prices that mightiness accompany 1 large institution's sales. (Except that leverage together with upper-case missive of the alphabet ratios at 1 time strength institutions to sell fifty-fifty if they don't desire to, a delicious representative of contradictory regulatory commands.)
Owen Lamont's classic characterizatiion of policy-maker's mental attitude toward selling short, at 1 time applies to selling at all.
Policymakers together with the full general populace appear to possess got an instinctive reaction that curt selling is morally wrong. Short selling has been characterized every bit inhuman, un-American, together with against GodThe magazine nails the basic problem
For viii years, federal regulators possess got failed to define just the “systemic risks” they claim they tin strength out position across the fiscal landscape.But no Definition makes it slowly to endlessly expand the word's meaning.
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