How Does Regulation Affect the Risk Taking of Banks? A U.S. and Canadian Perspective

This historical study utilizes annual insured bank data from 1936 through 1989 to empirically evaluate the impact of bank regulation on bank risk taking in a cross-country comparison of the United States and Canada. Risk is hypothesized to be determined, in part, by the regulatory environment in which a bank operates. The findings of this analysis contributes to the contemporary deregulation policy debate, since both branch banking restrictions and deposit insurance variables are found to be detrimental to bank stability. More specifically, these results support the 1994 Riegle–Neal Interstate Banking and Branching Efficiency Act, which removed legislative barriers to interstate branching. These results also confirm expectations that deposit insurance increases risk taking and supports the 1991 mandate by regulators that risk-based deposit insurance be created. Further, these findings support the 1988 Basel Accord to standardize bank capital requirements internationally and to link these standards to bank risk taking.     

Responding to the foreclosure crisis

Abstract

Regional economic downturns, speculation on skyrocketing home prices, and rampant unfair and deceptive mortgage lending practices have combined to create the perfect foreclosure storm in America. More than 2 million foreclosures are expected to occur during the next 12 to 18 months. Common to all three of these contributing factors is the reality that effective regulation of the mortgage market would have greatly limited damage from foreclosures.

This article traces the origins of the subprime market crisis and the resulting impact of foreclosures on the housing market, minority households, and the economy. The article also reviews the effectiveness of current interventions to mitigate or limit foreclosures and recommends broader solutions to help families maintain their homes.     

Does public debt matter for human capital development? Evidence from Nigeria

An inquiry into the impact of external and domestic borrowings is considered timely for Nigeria, given the growing public debt profile amid deteriorating human capital development. Using data from 1990 to 2021, the study estimates the effects of domestic and external debts on Nigeria's human capital development. The study employed the fully modified ordinary least squares and canonical cointegration regression as the main estimation technique and the robustness check, respectively. The study discovered that domestic and external debt, economic growth and debt servicing exert positive and significant influence on human capital development in Nigeria while environmental pollution has an inverse and significant impact on human capital development in Nigeria. Premised on the outcomes, policy suggestions aimed at enhancing human capital development in Nigeria have been put forward.     

我国国情规模浅析

本以一些常用的指标对我国的国债规模进行衡量，并对可能出现的潜在国债加以分析，说明我国目前国债规模确实存在风险，认为只有通过体制改革才能从根本上化解由此引发的财政风险。     

Outlook: The subprime lending crisis: Focus on the problem: Subprime borrowers in trouble

Abstract

Public policy should be directed at serving the large number of borrowers who have recently taken out subprime loans and who are at serious risk of losing their homes when their mortgages reset. Practicing forbearance and providing counseling for defaulting homeowners, as well as allowing them to refinance into a Federal Housing Administration loan, can be particularly helpful. Broad changes in housing programs and in the structure of the mortgage market should be considered on their merits as good or bad public policy for the long term, not simply as solutions to the subprime problem.     

Serial payers,serial losers? The political economy of Argentina’s public debt

A global neoliberal architecture has enabled many countries to increase their public debts to meet their fiscal needs. But since 2008 a number of European and North American economies have faced financial crises induced by unsustainable debts. This paper analyses the case of post-default Argentina since 2001, so as to better comprehend the political economy of public debt, especially in cases where governments are elected on anti-austerity platforms. Presidents Néstor and Cristina Kirchner were committed to a debt-reduction policy, yet Argentina faced a new, ‘selective’, default in 2014. This paper analyses how the country has been trapped in a cycle of debt dependency, which can only be interrupted by a comprehensive audit of the debt’s legitimacy followed by debt cancellation. Critical lessons are provided for other countries facing similar situations.     

Three paradigms in a single monetary circulation

The nature of money is simple and easy to understand, both what it is and what it was; it is the ＂law of gravity＂ we all understand. Many macroeconomic concepts and operations are based on money. Without it, they would be impossible to comprehend and, in fact, can only be understood by methodically tracking the circulation of money. There are three core paradigms of money and money circulation： the money multiplier, the velocity of circulation of money income and the money-income multiplier. In this paper, we try to demystify or decouple some of these circulatory mechanisms in order to establish, to the extent that is possible, a single comprehensive theory. A comprehensive theory or an approximation to such demands that the three economic operations corresponding to the above three paradigms form part of the same monetary macroeconomic phenomenon. To prove workable, it requires that the formulae arrived at being represented by a single mathematical expression. This paper shows that there is a conflict between, on one hand, the inevitable and persistent economic intuition that relates the three paradigms and, on the other, the mathematical formulae （and their components） that occasionally negate this.     

Comment on Michael A. Stegman et al.’s “Preventive servicing is good for business and affordable homeownership policy”: What prevents loan modifications?

Abstract

After discussing the article by Stegman et al., this comment describes the barriers to preventive servicing for securitized residential loans and assesses the importance of loan modifications, given the recent increases in default and foreclosure rates for subprime loans. Several hurdles slow or reduce such modifications, even those that help borrowers and investors alike. For example, self‐interest may reduce servicers’ willingness to modify loans rapidly. In addition, underlying securitization agreements may impede servicers’ ability and discretion in this area. Further, tax laws that govern a common securitization entity may limit modifications, as may accounting standards. Finally, “tranche warfare,” the sometimes contradictory fiduciary duties servicers have toward investors holding different tranches of securitized pools, may decrease their ability or their willingness to modify loans.

This comment concludes that barriers to effective loan modifications should be reduced or eliminated where feasible, but that the securitization of subprime loans creates risks for borrowers.