Slumps that shaped modern finance (2014)

http://www.economist.com/news/essays/21600451-finance-not-merely-prone-crises-it-shaped-them-five-historical-crises-show-how-aspects-today-s-fina

by Danieru • 7 years ago

44 6 7 years ago

economist.com

ggm2• 7 years ago

nicely illustrated, coherent story. I'd love to see the european banking crisis, Iceland (for instance) and the UK de-multualisations on this. Or, the Japan or South American breakdowns of the post-war world, and the timeline for IMF and World Bank intervention (which, like the chicago school, has not always been as beneficial as they like to believe)

diesign• 7 years ago

Could you point me to some resources to learn about the UK Demutualizations?

Did some googling and the only standout was a Needleman text from 1991. Is this relevant to what you are talking about?

ggm2• 7 years ago

I only skimmed, but these felt relevant. The Needleman one feels like an intensely structural/process analytic paper, focussed on legalisms. It isn't exploring the problem as such. I felt these went more to the polemic intent I had saying the UK demutualization had consequences.

https://kar.kent.ac.uk/64829/ Abstract This paper examines and compares the performance and operating behaviour of demutualized building societies (DBS) over the period of 1987-2007 relative to mutual building societies and major retail banks in the UK. We find significant differences in their operating behaviour over this period and show that the operating behaviour varies with the form of ownership. We also investigate the potential causes of the failure of all DBS in the UK. Our findings show significant changes in the funding and lending strategies of DBS which expose them to higher risk. We also find a strained capital formation and deteriorating capital base of DBS in the post-conversion period. Our results suggest that changes in the business model, diminished capital base and, in part, failing to get all the necessary funding from the wholesale market at the time of the financial crisis of 2007-08 contributed to the demise of a once a successful financial institution in the UK.

https://www.thenews.coop/85589/sector/big-bang-demutualisati...

https://www.researchgate.net/publication/314899851_From_Demu... Robin Klimecki and Hugh Willmott University of Cardiff Business School, Cardiff, UK Abstract – This paper aims to examine the inﬂuence of neoliberalist deregulation on the rash ofdemutualisations of the 1990s. It explores the extent to which the demutualisation of two building societies – Northern Rock and Bradford & Bingley – and their subsequent demise in the wake of the credit crunch exemplify key features of the neoliberalist experiment, with a particular focus on their post-mutualisation business models.

https://www.orkestra.deusto.es/images/investigacion/publicac... ‘Strategic Failure’ and the case of the UK’s former Building Societies: lessons for the reform of governance in the UK Banking sector J. Robert Branston, Philip R Tomlinson, James R. Wilson

patfla• 7 years ago

The Economist writes up this history well and I learned a few things. But in particular in the conclusion, the Economist does their usual Mr-Market-knows-best, and Mr-Govt-makes-us-weak, shtick.

There are true believers of the left - and there are true believers of the right.

Danieru• 7 years ago

I read the article and I am not seeing where you are getting that.

The article supports the claim that having government subsidies of the banks risk causes banks to take greater risks This seems like a common idea. The Economist is arguing that it is important to keep capitalists liable for their investments. The Economist does not want the government to be paying for bad bets of the private sector. They are arguing for higher capital requirements and tougher regulation.

thedudeabides5• 7 years ago

"At one point he locked the entire New York banking community in his library until a $25m bail-out fund had been agreed."

Feels like JPM is a bit underrated by history. Imagine a Fed Chair who's not a government official and who's only authority comes from the combination of his financial prowess and personal balance sheet.

Slumps that shaped modern finance (2014)

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