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Soros Launches Effort to Battle Free-Market Zeal | Newsweek Voices - Michael Hirsh | Newsweek.com
"Even Alan Greenspan appears to be engaged in a fierce argument ... with his own younger self. "U.S. regulators should consider breaking up large financial institutions considered 'too big to fail,' " he said earlier this month. But for most of his life, Greenspan was an Ayn Rand libertarian who abhorred the idea that government should break up anything; he once wrote that "the entire structure of antitrust statutes in this country is a jumble of economic irrationality and ignorance." Bigger was better, he said, and that way of thinking largely governed his stewardship of the Fed from 1987 to 2005. "The control by Standard Oil, at the turn of the century, of more than eighty percent of refining capacity made economic sense and accelerated the growth of the American economy," Greenspan wrote in Capitalism: the Unknown Ideal in 1961. But Greenspan now has this to say about banks: "If they're too big to fail, they're too big. In 1911, we broke up Standard Oil—so what happened? The individual parts became more valuable than the whole. Maybe that's what we need to do.""
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Even Alan Greenspan appears to be engaged in a fierce argument ... with his own younger self. "U.S. regulators should consider breaking up large financial institutions considered 'too big to fail,' " he said earlier this month. But for most of his life, Greenspan was an Ayn Rand libertarian who abhorred the idea that government should break up anything; he once wrote that "the entire structure of antitrust statutes in this country is a jumble of economic irrationality and ignorance." Bigger was better, he said, and that way of thinking largely governed his stewardship of the Fed from 1987 to 2005. "The control by Standard Oil, at the turn of the century, of more than eighty percent of refining capacity made economic sense and accelerated the growth of the American economy," Greenspan wrote in Capitalism: the Unknown Ideal in 1961. But Greenspan now has this to say about banks: "If they're too big to fail, they're too big. In 1911, we broke up Standard Oil—so what happened? The individual parts became more valuable than the whole. Maybe that's what we need to do."
SSRN-Users as Service Innovators: The Case of Banking Services by Eric Von Hippel, Pedro Oliveira
Leaders' Statement: The Pittsburgh Summit
1. We meet in the midst of a critical transition from crisis to recovery to turn the page on an era of irresponsibility and to adopt a set of policies, regulations and reforms to meet the needs of the 21st century global economy.
2. When we last gathered in April, we confronted the greatest challenge to the world economy in our generation.
3. Global output was contracting at pace not seen since the 1930s. Trade was plummeting. Jobs were disappearing rapidly. Our people worried that the world was on the edge of a depression.
4. At that time, our countries agreed to do everything necessary to ensure recovery, to repair our financial systems and to maintain the global flow of capital.
5. It worked.
6. Our forceful response helped stop the dangerous, sharp decline in global activity and stabilize financial markets. Industrial output is now rising in nearly all our economies. International trade is starting to recover. Our financial institutions are raising needed capital, financial markets are showing a willingness to invest and lend, and confidence has improved.
7. Today, we reviewed the progress we have made since the London Summit in April. Our national commitments to restore growth resulted in the largest and most coordinated fiscal and monetary stimulus ever undertaken. We acted together to increase dramatically the resources necessary to stop the crisis from spreading around the world. We took steps to fix the broken regulatory system and started to implement sweeping reforms to reduce the risk that financial excesses will again destabilize the global economy.
8. A sense of normalcy should not lead to complacency.
9. The process of recovery and repair remains incomplete. In many countries, unemployment remains unacceptably high. The conditions for a recovery of private demand are not yet fully in place. We cannot rest until the global economy is restored to full health, and hard-working families the world over can find decent jobs.
10. We pledge today to sustain our strong policy response until a durab
SSRN-Networks in Finance by Franklin Allen, Ana Babus
Modern financial systems exhibit a high degree of interdependence. There are different possible sources of connections between financial institutions, stemming from both the asset and the liability side of their balance sheet. For instance, banks are directly connected through mutual exposures acquired on the interbank market. Likewise, holding similar portfolios or sharing the same mass of depositors creates indirect linkages between financial institutions. Broadly understood as a collection of nodes and links between nodes, networks can be a useful representation of financial systems. By providing means to model the specifics of economic interactions, network analysis can better explain certain economic phenomena. In this paper we argue that the use of network theories can enrich our understanding of financial systems. We review the recent developments in financial networks, highlighting the synergies created from applying network theory to answer financial questions. Further, we propose several directions of research. First, we consider the issue of systemic risk. In this context, two questions arise: how resilient financial networks are to contagion, and how financial institutions form connections when exposed to the risk of contagion. The second issue we consider is how network theory can be used to explain freezes in the interbank market of the type we have observed in August 2007 and subsequently. The third issue is how social networks can improve investment decisions and corporate governance. Recent empirical work has provided some interesting results in this regard. The fourth issue concerns the role of networks in distributing primary issues of securities as, for example, in initial public offerings, or seasoned debt and equity issues. Finally, we consider the role of networks as a form of mutual monitoring as in microfinance.
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