“First, Dodd-Frank ignores all of the others complicit in creating the subprime (mortgage) crisis, including the Fed and the other financial regulators who failed to see it coming, our government which, while the crisis materialized, cheered on the creativeness of the financial industry in making homeownership plausible for all…

…, and the credit-rating firms whose Triple-A ratings guaranteed widespread marketability of the toxic assets. Second, we simply do not know what the next crisis will look like and whether or not bank capital will even be a relevant factor in its resolution. Third, Dodd-Frank has been a very effective jobs and growth killer, second only to the Federal Open Market Committee’s experimental policy these past eight years.”, Jim Kudlinski, Ph.D., former Federal Reserve Board official, The Wall Street Journal Letters to the Editors, December 1, 2016

“With regularity these days, the truth about the 2008 financial crisis and the falsity of the liberal politicians and their lackeys’ in the mainstream media/ press view, that greedy and reckless bankers and Wall Street caused it, is being exposed.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Opinion Letters

More Bank Capital Won’t Stop the Next Crisis

We simply do not know what the next crisis will look like and whether or not bank capital will even be a relevant factor in its resolution.

Regarding your editorial “Cash and Kashkari” (Nov. 22): The consensus is right, Dodd-Frank won’t stop the next financial crisis. And raising bank capital to 15% of assets as Neel Kashkari, the president of the Minneapolis Federal Reserve wants to do, won’t do so either. Given a repeat of the widespread penetration and pervasiveness of a shock similar to subprime, the fact is it is impossible to load enough capital on to the balance sheets of banks to guarantee avoidance of another crisis and taxpayer bailout. To place reliance on the protective features of Dodd-Frank, as we have been doing, is simply false security for three reasons.

First, Dodd-Frank ignores all of the others complicit in creating the subprime crisis, including the Fed and the other financial regulators who failed to see it coming, our government which, while the crisis materialized, cheered on the creativeness of the financial industry in making homeownership plausible for all, and the credit-rating firms whose Triple-A ratings guaranteed widespread marketability of the toxic assets.

Second, we simply do not know what the next crisis will look like and whether or not bank capital will even be a relevant factor in its resolution.

Third, Dodd-Frank has been a very effective jobs and growth killer, second only to the Federal Open Market Committee’s experimental policy these past eight years.

Jim Kudlinski, Ph.D.

Overland Park, Kan.

Mr. Kudlinski is a former Fed Board official.

 

Posted on December 6, 2016, in Postings. Bookmark the permalink. Leave a comment.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: