Banks - Words
Regulatory Forbearance
- 2015 0723 - GOV (House) - Ending ‘Too Big to Fail’: What is the Proper Role of Capital and Liquidity? - [PDF-94p, VIDEO-YouTube] - House Page
- (p13) - Chairman Jeb HENSARLING (R-TX). Speaking of interest, also in your writings you have spoken about a convergence of interest between large banks and their regulators that might diverge from the interest of taxpayers in times of stress.
- You spoke about the Bear Stearns scenario.
- Can you expand upon your views there, please?
- Mr. CALOMIRIS (Henry Kaufman Professor of Financial Institutions, Columbia University Graduate School of Business) - There is a large literature, academic literature that has identified persistent, across many countries, the tendency for supervisors to allow banks not to identify losses during recessions.
- The reason is, if you identify losses, banks might have to curtail credit.
- That is not popular with politicians or regulators, especially in democracies that hold elections.
- For example, it wasn’t until the 1988 election in the United States was over that we recognized major losses in the S&Ls.
- There are some recent articles showing that the same thing happened during our crisis in 2008.
- So we know that we can rely upon supervisors to go along with bankers in understating losses, not just in the United States but around the world.
- (p13) - Chairman Jeb HENSARLING (R-TX). Speaking of interest, also in your writings you have spoken about a convergence of interest between large banks and their regulators that might diverge from the interest of taxpayers in times of stress.