How Big Banks Can Spread Bigger Financial Ills

By The Staff of FUTURITY.ORG, Futurity.org

November 25, 2012

 

Looking at large national and international banks in terms of ecosystem stability and contagion models reveals that their influence and potential power for destruction far exceeds their actual size.

New Trading Case Casts a Deeper Shadow on a Hedge Fund Mogul

By PETER LATTMAN and PETER J. HENNING

Evidence in a criminal case suggests that Steven A. Cohen of SAC Capital Advisors participated in trades that the government says illegally used insider trading information.

In 2010, the billionaire hedge fund manager Steven A. Cohen gave a rare interview to Vanity Fair. He said that he wanted to combat persistent rumors that his firm, SAC Capital Advisors, routinely violated securities laws by trading on confidential information.

“In some respects I feel like Don Quixote fighting windmills,” Mr. Cohen said at the time. “There’s a perception, and I’m trying to fight that perception.”

Why is housing such a popular investment? A new psychological explanation

Thomas Alexander Stephens, Jean-Robert Tyran, 23 November 2012

Despite its meagre real returns in the long run, many people still think that investing in housing is a good idea. This column argues that a major reason for the tendency to buy houses is that it’s rare to lose money. Recent research shows people’s perceptions of housing transactions to be shaped by whether they gain or lose money – above and beyond the real returns.

In the wake of the economic crisis that began in 2007, homeowners in many countries have faced substantial losses. Prices have fallen in both nominal and real terms. In the US, for example, house prices in the first quarter of 2012 were down more than 40% in real terms from their peak (Shiller 2012).Nevertheless, housing remains a popular investment¹. This popularity is surprising because, over the post-war period, US house prices have been essentially flat in real terms while the US stock markets have risen more than fourfold in real terms over the same period².

Banking Union and ambiguity: Dare to go further

Sylvester Eijffinger, Rob Nijskens, 23 November 2012

The Eurozone is moving towards a banking union, with the ECB at its centre. This column argues that there are worrying problems with the proposals, suggesting that the ECB ought to follow a principle of ‘constructive ambiguity’ if it wants to maintain and improve its credibility as a supervisor.

On September 12, the European Commission published a proposal to establish a banking union in the Eurozone¹. This proposal delegates the supervision of large cross-border banks to the ECB. The ECB will also be responsible for supervising smaller banks, in cooperation with national supervisors. The European Banking Authority (EBA) can coordinate this through the proposed Single Supervisory Mechanism.