Friday, November 27, 2009
... I prefer to see policy reacting to apparent exuberance in asset markets and the problematic risk exposure this could create, rather than initiating action out of a strong conviction that these particular assets are overvalued. ... One advantage of using financial stability as our metric is that it does not require a central bank to take a stand on whether the assets in question are overvalued. Rather, the responses would be implemented whenever there are concerns that asset prices may experience a sharp decline in the future, regardless of whether this decline is driven by fundamentals or by the bursting of an asset bubble. [emphasis mine]
Why am I troubled by the phrase emphasized?
Under the Recourse Rule, an AA- or AAA-rated asset-backed security, such as a mortgage-backed bond, received a 20-percent risk weight, compared to a zero risk weight for cash and a 50-percent risk weight for an individual (unsecuritized) mortgage. This meant that commercial banks could issue mortgages–regardless of how sound the borrowers were–sell them to investment banks to be securitized, and buy them back as part of a mortgage-backed security, in the process freeing up 60 percent of the capital they would have had to hold against individual mortgages. Capital held by a bank is capital not lent out at interest; by reducing their capital holdings, banks could increase their profitability.
Yet on closer look by the blog post in the Federal Register ruling:
The [regulatory] agencies expect that banking organizations will identify, measure, monitor and control the risks of their securitization activities (including synthetic securitizations using credit derivatives)...Banking organizations should be able to measure and manage their risk exposure from risk positions in the securitizations, either retained or acquired, and should be able to assess the credit quality of any retained residual portfolio…Banking organizations with significant securitization activities, no matter what the size of their on-balance sheet assets, are expected to have more advanced and formal approaches to manage the risks.
Again from the blog post:
It is telling banks to handle this themselves, because the “science” of risk management is well provided within private financial services, and it is better for it to be handled this way rather than with the crude tools public regulators used. And I think that this narrative, that new changes to banking regulations were more friendly to the financial community in the general move to deregulation, is a real challenge for those who think that markets would have been able to do better without any regulation – what stopped them this time around?
The question is this: Is this new regulation really deregulation? If so, new regulations (or deregulations) should be scrutinized a little more closely to observe its (unintended?) consequences instead of the seemingly hands off approach taken?
Sunday, November 22, 2009
She graduated magna cum laude from the GW Business School in May, applied for 30 jobs at some of the nation's best-known companies, and it went nowhere. After visiting the campus career center and redesigning her résumé, she applied for 10 more. Still nothing. ... There was no place to go but home, with a collection of rejection letters and a haunting sense of betrayal. For 23 years, she had advanced down America's path to success -- perfect grades, a $200,000 college degree, a folder overstuffed with business cards -- only to have it dead-end back where she started. ...
As graduation neared, Melissa spent her culminating business class comparing rejection e-mails with classmates. Forty students were in the room. Three had jobs.
Friday, November 13, 2009
We're also starting to see petrol pumps with different prices for cash and credit again. Perhaps it's the sign of the recession. Just last week when we went to Tysons Buffet they were no longer accepting credit cards either and these are not at all large transactions.
As far as food goes - it's not the best, and it's not cheap either but there were lots of choices for the kids which was why we went there.
Regardless, my impression of flu vaccines have not been favorable. Of the 7 years which I've been taking the vaccine, I've had the flu maybe 2 or 3 times (counting this time). That's not a very good average for a vaccine. Yes, I realize that this is not the right way to make the inference - that it should be across a large population at one point in time but I think this emphasizes the point I'd like to make.
Which is, that medicine really is not a science if it has to rely on statistics to make conclusions for it. That randomized trials really cannot answer the question that really matters: What will it do for me?
Fortunately, CarMax has a 30-day money back guaranty which as good as it sounds I'll probably not exercise since buying a car is a pain.
The electric motor doesn't seem to do all that much according to the energy read out on the dash. I was hoping to see it run all electric for a lot of the time especially when cruising at 20 mph or below on neighborhood streets but it doesn't.
What it did remind me of however was a dynamo that was attached to my old bicycle. It was used to power the lamps and the luminosity would depend on how fast we peddled.