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Begin New Search Topic Regulation Author Edward J. Kane

1. Masters of Illusion: Bank and Regulatory Accounting for Losses in Distressed Banks

Author:
Edward J. Kane
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
This essay is part of a larger work on the history of Federal Reserve policymaking entitled Banking on Bull. The study seeks to explain why the instruments of central banking inevitably break down over time. A big part of the explanation is that policymakers want accounting measures of bank net worth to be flexible enough to allow bankers and regulators to slow the release of adverse information about distressed banks, particularly very large ones. Modern regulatory frameworks focus on maintaining what can be described as the adequacy of accounting capital. But this framework is bull, because in tough times, bank accountants know how to make losses disappear.
Topic:
Federal Reserve, Regulation, Central Bank, and Banking
Political Geography:
Global Focus

2. Immaculate Deception: How (and Why) Bankers Still Enjoy a Global Rescue Network

Author:
Edward J. Kane
Publication Date:
07-2020
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Dodd-Frank is an example of counterfeit reform. It is designed principally to benefit very big banks and it has helped these banks to increase their market share greatly during the last 10 years. The Act provides lesser and contradictory forms of costs and comfort to smaller US bankers and taxpayers, foreign bankers (especially the managers of Deutsche Bank), and foreign governments. Small bankers and taxpayers are encouraged to believe that the 2007-2009 US rescue of the world’s biggest banks was a one-time maneuver. But an opposite message is sent through the press as (with great fanfare) the industry absolves and congratulates ex-officeholders: (1) for having transferred massive amounts of subsidized support not just to stakeholders in US megabanks, but also to European bankers and governments, and (2) for keeping the subsidies flowing long past the panic’s expiry date. Genuine reform will require changes in fraud laws and an effort to post on a continuing basis the value of the safety-net subsidies individual megabanks enjoy.
Topic:
Government, Reform, Regulation, Finance, Global Financial Crisis, and Banking
Political Geography:
United States