"He's a snake in the grass, I tell ya guys; he may look dumb but that's just a disguise; he's a mastermind in the ways of espionage." Charlie Daniels, "Uneasy Rider" moral hazard - TT's Lost in Tokyo

Rot at the Core: John Quiggin says that to stop banks from engaging in risky activities we need to outlaw investment banking by TokyoTom

I commented last week on a blog post by leftist Aussie economist John Quiggin , who blamed the financial collapse on investment banks, and suggested that either: (i) investment banking should be much more heavily regulated ("Properly done, regulation...

Rot at the Core: Dan Ariely on financial crisis & psycho-social aspects of cheating by TokyoTom

I just ran across an interesting speech and related commentary provided last month at TED by behavioral economist Dan Ariely , professor at MIT and author of Predictably Irrational . Both the speech and the commentary are worth a look. Ariely's speech...

Rot at the Core: KC Fed Pres. Hoenig says "Too Big has Failed", and calls for receivership of failed banks / end to bailouts by TokyoTom

Finally, someone in the Fed is arguing that the Fed should stop printing money like crazy to bail out managers, owners and counterparties of failed banks. In a speech on Friday, March 6, Thomas Hoenig , President of the Kansas City Fed, argued strongly...

[Update] Rot at the core: Paul Volker notes that something is wrong with incentives, but can`t quite put his finger on it; guess that means MORE regulation by TokyoTom

[Update: Links fixed] Bloomberg reported on March 6 that Former Fed Chairman Paul Volker, in proposals to the Obama administration regarding financial regulatory reform that were included in a January report he wrote with the "Group of 30",...

Rot at the core: Fed Vice Chair Don Kohn`s Senate testimony reveals the Fed’s moral hazard maximizing strategy (h/t Willem Vuiter at the FT) by TokyoTom

The March 6 Financial Times has a great piece by Willem Vuiter , professor at the LSE and former chief economist of the EBRD, that completely rips the Fed`s bailout of AIG`s credit default swap counterparties, as emblembatic of the epidemic of moral hazard...