Home Loans – Five Things to Watch Out For

Homeowner loans can be a short and clean manner to finance foremost investments and purchases. With home loans, you may faucet into the price of your largest asset as a way to pay for things which can be essential to you. Those ‘things’ are absolutely limitless – you do not have to account for a way you spend the money you borrow in opposition to your home to all and sundry however your self. It can as without difficulty be spent to finance a 12 months trotting across the Continent as it could to pay on your education, make enhancements to your private home or pay for a brand new automobile.

With all the loan merchandise to be had, nearly all of us who owns a domestic can discover a loan agency in the UK to offer them a home loan. The huge range of UK creditors who might be glad to advance you money on the security of your own home additionally manner that there may be lots of opposition to your commercial enterprise. And that means that in case you save round, you could discover a few extraordinary deals on domestic loans when you want one. Unfortunately, it additionally approach that there are numerous mortgage companies offering products with lots of hooks and traps in them. To assist you keep away from the ones traps, right here are five matters to watch out for when you’re searching for home loans.

1. Look beyond the APR.

While the APR is normally taken into consideration the unmarried first-class manner to evaluate one domestic mortgage with any other, the manner that APRs are calculated isn’t pretty standardized. Unscrupulous creditors have found approaches to ‘conceal’ expenses from the APR calculation, making their loans a chunk more pricey than the APR would lead you to consider. A higher calculation for comparing loans is overall loan fee which takes into consideration the repayment of the loan, all interest fees and other charges to be able to be paid before you are achieved with it.

2. Be cautious of repayment coverage.

Repayment coverage is meant to assure you and the loan employer that your loan will be paid off in full if something ought to show up to your ability to make the payments. Some creditors will offer you compensation insurance through the organisation that they pick out – frequently at quotes so excessive that you’ll pay nearly as an awful lot as you borrowed in the first place. Shop for compensation coverage simply as you do for the mortgage itself. You are not ever obligated to simply accept the repayment insurance provided you with the aid of the mortgage business enterprise or bank.

Three. Know all the costs you may must pay up front.

Arrangement prices – once in a while known as origination fees – are paid when you follow for a mortgage. In some cases, the ones fees can be due whether you are accredited for the mortgage or now not, and whether or not or now not you take delivery of the loan. Some of those association charges can upload up to £seven hundred to the whole cost of your loan.

4. Check into how hobby is calculated and compounded.

The manner that hobby is calculated can save or value you a notably massive amount of money. If hobby is calculated yearly, you may pay some distance more in interest expenses than if it’s far calculated each day. If feasible, test your predicted monthly loan payments on the loan agency’s very own mortgage calculator for comparison purposes.

Five. Exit costs can make it difficult to get into a lower-price mortgage arrangement later.
Checking the go out or early compensation costs at the loans you’re considering can be especially critical if you’re buying higher cost domestic loans because of brief credit score difficulties. If you wish to switch to a decrease hobby mortgage while you may qualify for one, then you’ll need to be positive that the go out price would not make it impractical to accomplish that.

You can compare all facets of home loans at moneyeverything.Com, from arrangement expenses to APRs. Remember, no matter what your situation, you will get the excellent domestic loans feasible with the aid of shopping around and evaluating loan prices and phrases.

21/9/2013: Human Capital & Social Mobility: Capital Tax v Education Spending Reforms

A new paper Human Capital, Social Mobility and the Skill Premium (September 18, 2013, CESifo Working Paper Series No. 4388. Available at SSRN: http://ssrn.com/abstract=2327435) by Angelopoulos, Konstantinos and Malley, James R. and Philippopoulos, Apostolis produces fascinating insights into the relationship between human capital, physical capital and skills/wage premium.

The main drivers of the skill/wage premium are commonly recognised to be: 

  1. Skills-complementary technical change (SBTC – B standing for ‘biased’), “which raises the demand for skilled labour, and the relative supply of skilled versus unskilled labour”. Economic policy can influence this channel by increasing R&D and innovation which lead to increased technology contribution to the economic activity and in turn generate demand for complementary skills.
  2. “Occupational choice of economic agents, usually focusing on the distinction between entrepreneurs and workers, and its implications for social mobility.” Here, economic policy too can have an impact via, say labour markets regulations and interventions, as well as general taxation policies.
  3. Direct policy impact via stimulating “capital accumulation via tax reforms” and direct “labour markets …intervention”.

In contrast, “although education policies and tax policies have been considered as important determinants of social mobility, their impact on the joint determination of social mobility and the skill premium has generally not been studied.”

Human Capital, Social Mobility and the Skill Premium “develops a dynamic general equilibrium model to highlight the role of human capital accumulation of agents differentiated by skill type in the joint determination of social mobility and the skill premium.”

The authors find that “the model with endogenous social mobility can capture the empirical co-movements of the skill premium, the relative supply of skilled to unskilled workers and aggregate output in the U.S. data from 1970-2000.” The study shows “that the model predictions for these empirical co-movements are improved when we allow for positive externalities from skilled human capital on social mobility.” In other words, skill premium for skilled and unskilled workers tends to rise/fall jointly (co-move) and this co-movement is strengthened when increased social mobility of skilled human capital is associated with increased social mobility of unskilled human capital.

The authors’ “policy results first show that endogenous social mobility creates additional incentives for the agents which enhance the beneficial effects of policy on aggregate outcomes and wage equality.”

Second, that important dynamic effects of policy on the skill premium are captured by allowing human capital accumulation to affect social mobility. In particular, post reform, the skill premium is higher in the short- to medium-run than in the long-run.”

Third, that although all policy reforms considered lead to an increase in output and social mobility, their implications regarding the skill premium differ. In particular, the skill premium increases after a capital tax cut and decreases after an increase in spending on education for unskilled agents and in spending on education for skilled

agents.”

In other words, the authors show that “endogenous social mobility and human capital accumulation are key channels through which the effects of capital tax cuts and increases in public spending on both pre- and post-college education are transmitted.”

Note: in my view this tends to support the idea – outlined by me in my TEDx Dublin talk last Saturday – that we are witnessing migration to the age of tech-enabled human capital away from the skills-enabled tech capital. 

“In particular, social mobility creates additional incentives for the agents which enhance the beneficial effects of policy reforms. Moreover, the dynamics of human capital accumulation imply that, post reform, the skill premium is higher in the short-to medium-run than in the long-run.”

Note: in the context of my TEDx Dublin theme, the above reinforces my concept of new policy paradigm of C.A.R.E. (policy dimension aimed at establishing a comprehensive economy that is capable of Creating, Attracting, Retaining and Enabling human capital).

“Regarding all three results above, the effects of public spending on education for skilled agents are dependent on the externality that skilled human capital has on social mobility. In particular, a negative externality generally reduces many of the positive effects of this policy reform.”

What about a capital tax cut

The “improvement in aggregate outcomes” following tax cut “also implies increased wage inequality. The reason is that the policy-induced increase in the capital stock is skill-biased because capital complements skilled labour more than unskilled. Hence, …the skill premium increases with the capital stock post-reform.”

However, this “increase in the skill premium works to encourage the accumulation of unskilled human capital, as a means to increase social mobility to capture the higher returns associated with skilled employment. In turn, …the resulting increase in the relative skill supply acts to lower the skill premium. In fact, the reduction in the skill premium starts taking effect 20-30 years after the reform, when the increase in the share of skilled labour is sufficiently strong to counterbalance the increase in the capital stock.”

Note: in my TEDx Dublin talk context, the above relates to the changes in underlying drivers for growth I highlighted in the chart – in particular, the lags we are experiencing in terms of the Age of Tech translating with a delay into future wage premium erosion (some might argue we are already witnessing this today). 

Education spending increase for unskilled workers: “As expected, the stock of human capital for unskilled labour increases and this raises output in all models and social mobility in the models that allow for endogenous skill accumulation. In turn, this increase in the relative supply of skill leads to a decline in the skill premium in the medium- to long-run. However, initially, the skill premium increases …because the labour productivity gains, brought about by the increase in human capital, also increase the return to physical capital and thus lead to increased capital stock, which tends to increase the skill premium.” 

Over time, “when the relative skill supply has increased sufficiently, the skill premium starts to decline. In this case, in fact, the increase in the share of skilled in the population is sufficiently strong to decrease the skill premium in the long-run.”

“The dynamic processes of human capital accumulation and social mobility have non-trivial implications on the …determination of …skill premium-social mobility” co-movements. Long-run: wage inequality is reduced along with increased social mobility. Short-run: wage inequality increases.

Summary: 

(1) In the long-run, “government spending on unskilled education, by increasing the labour productivity of unskilled labour and increasing their skill accumulation, raises output, reduces wage inequality and improves social mobility. However, “the increase in government education spending crowds out private consumption.” In the short-run, unskilled education increases lead to increased inequality and social mobility declines.

(2) “…Increases in government spending on the education of the skilled agents has positive effects on output and consumption, as well as encouraging social mobility, despite the reduction in the skill premium. This occurs because, by supporting the productivity of the skilled, the government indirectly increases the potential future benefits of the unskilled, if they succeed in climbing the social ladder. However, these results are sensitive to whether externalities of skilled human capital on social mobility are positive or negative. The former enhance the positive effects on social mobility, wage inequality, and welfare, whereas the latter reverse them for social mobility and wage inequality and lower them for welfare.”

(3) “Wage inequality effects of capital tax cuts are significantly dampened by the increase in the relative skill supply, which follows the increased returns to upward social mobility, while, at the same time, the aggregate efficiency effects of the capital tax cut become stronger.”

25/01/2011: Just how independent is the EU’s Systemic Risk Board

On January 20 there was a momentous occasion in Europe. After years of crisis, bent on preventing another financial meltdown in the future, the EU unveiled the first sitting of the new super-regulatory/supervisory body – the European Systemic Risk Board.

Here is the press release from the EU official site with emphasis and comments added by me:

“The General Board of the European Systemic Risk Board (ESRB) held its inaugural meeting today at the European Central Bank (ECB) in Frankfurt am Main. The meeting led to a number of decisions on the set-up and functioning of the Board:

  • Mr Marek Belka, Governor of the Narodowy Bank Polski; Mr Mario Draghi, Governor of the Banca d’Italia; Mr Athanasios Orphanides, Governor of the Central Bank of Cyprus; Mr Axel Weber, President of the Deutsche Bundesbank; were elected members of the Steering Committee for three years. [Note that all members of the Steering Committee are Central Bankers, hence not independent from the ECB]

  • Mr Stefan Ingves, Governor of the Sveriges Riksbank was elected Chair of the Advisory Technical Committee for three years. [Again the above comment applies]

The ESRB is an independent EU body responsible for the macro-prudential oversight of the financial system within the Union. The ESRB is located in Frankfurt am Main and its Secretariat is provided by the European Central Bank.

The Chair of the ESRB is the President of the European Central Bank, Mr Jean-Claude Trichet. The first Vice-Chair of the ESRB is Mr Mervyn King, Governor of the Bank of England. He was elected by the members of the General Council of the ECB on 16 December 2010 for five years. The second Vice-Chair of the ESRB will be the Chair of the Joint Committee of the European Supervisory Authorities.

The General Board consists of the following members with voting rights: the President and the Vice-President of the European Central Bank (ECB); the Governors of the national central banks of the EU Member States; one member of the European Commission; the Chairperson of the European Banking Authority (EBA); the Chairperson of the European Insurance and Occupational Pensions Authority (EIOPA); the Chairperson of the European Securities and Markets Authority (ESMA); the Chair and the two Vice-Chairs of the Advisory Scientific Committee (ASC); the Chair of the Advisory Technical Committee (ATC). The following members have no voting rights: one high-level representative per Member State of the competent national supervisory authorities; and the President of the Economic and Financial Committee (EFC).” (end quote)

So in a summary: the ESRB is composed of:

  • National CBs and supervisory authorities (subject to ECB control)
  • ECB members
  • EU Commission representatives
  • EU industry quangoes

And this is called ‘independent’?

Would it be advisable for you to Co-Sign on Someone’s Student Loans?

Dissimilar to different types of buyer obligation, understudy advances get extraordinary insurances under current laws going from gathering to liquidation. This extraordinary status applies to the essential borrower (the understudy) as well as to any co-endorser on the advance.

Understudy advances are one of the hardest sorts of obligation to shake. Current U.S. chapter 11 law enables a court to release these credits in insolvency just in the tightest conditions. Truth be told, the legitimate necessities for releasing training advances are so impressive to meet that most chapter 11 lawyers maintain a strategic distance from understudy credit cases out and out.

Since so few credit borrowers fit the bill for insolvency release under the law, by far most of advance obligation is conveyed until the point that the borrower reimburses the advance or bites the dust – albeit some non-government understudy advances even survive demise, passing the obligation on to the borrower’s co-underwriter.

Co-Signer Requirements of Student Loans

Most officially sanctioned understudy credits don’t require a co-endorser. Government Stafford understudy advances and Perkins understudy advances are granted to understudies without a credit check or co-endorser. The one special case would be government Grad PLUS advances, which are credit-based graduate advances.

Government PLUS advances for guardians are likewise credit-based and may, in specific cases, require a co-endorser for the guardians to have the capacity to take out the advance. In any case, the credit necessities for government PLUS parent advances and for elected Grad PLUS understudy advances are considerably less stringent than the credit prerequisites for non-elected private understudy advances.

Private understudy advances are credit-based advances issued by private loan specialists or banks. Under current credit criteria, most understudies, who normally have next to zero set up record of loan repayment, will require a co-underwriter keeping in mind the end goal to fit the bill for a private understudy advance.

Normally, a co-endorser is a relative who consents to pay the adjust of any co-marked credits if the understudy neglects to reimburse the advance, despite the fact that a family relationship is not a prerequisite. An understudy may have a random co-underwriter.

Government Student Loans versus Private Student Loans

Government-sponsored elected understudy advances accompany certain installment postponement and advance absolution benefits. Borrowers who are experiencing issues making their month to month credit installments might be qualified for up to three years of installment suspension because of monetary hardship, alongside an extra three years of self control, amid which intrigue keeps on accrueing, yet no installments would be expected.

For borrowers who are on the administration’s salary based reimbursement design, any remarkable government school credits can be released preceding full reimbursement if the borrower has made her or his month to month advance installments for a long time. Borrowers who go to work for the legislature or the general population area can have their government school advances excused following 10 years.

Government school advances can likewise be excused in the occasion the borrower bites the dust or turns out to be for all time crippled.

Non-government private understudy credits, then again, aren’t required to offer any of these installment delay or release arrangements. It is at the moneylender’s watchfulness whether to offer a battling borrower conceded or bring down month to month advance installments and significantly whether to release the private understudy advance upon the borrower’s demise or lasting incapacity.

With no unique administrations from the moneylender, private understudy credits will for the most part stay in reimbursement until the point that the note is fulfilled or charged off as a default, regardless of to what extent the reimbursement procedure takes.

The Legal Implications of Co-Signing on Student Loans

An advance co-underwriter has all an indistinguishable legitimate duties from the essential advance borrower and has a lawful commitment to reimburse the credit obligation under an indistinguishable terms from the essential borrower. The co-underwriter is truly a co-borrower and is similarly in charge of reimbursing the co-marked advances.

Shockingly, an excessive number of co-borrowers understand this fact late in the diversion.

In the event that you’ve co-marked on somebody’s advances and your essential borrower makes every last bit of her or his installments on the advance on time and as arranged, you may never get notification from the loan specialist. On the off chance that your essential borrower begins missing installments or installment due dates, notwithstanding, the bank will get in touch with you.

Regularly, when the moneylender is reaching you, the advance you’ve co-marked is now past due, and your FICO assessment may have officially endured a shot.

Remember that any lawful cures a moneylender has available to its for seeking after an advance obligation can likewise be connected to the co-underwriter. These lawful cures incorporate task of the reprobate advance record to an obligation gathering administration and a conceivable court activity. For reprobate elected instruction credits, the legislature may look to embellish your wages or grab any pay impose discounts you have coming your direction.

Furthermore, wrongdoings or a default on any advances on which you’ve co-marked will show up alone acknowledge report for all an indistinguishable antagonistic impacts from on the essential borrower’s credit report. The obligation from any co-marked advances will likewise stay on your acknowledge report as an open commitment until the point that the obligation is reimbursed (or discounted in case of a default).

4 Tips for Protecting Yourself as a Co-Signer on a Student Loan

So would it be advisable for you to co-sign on an understudy advance? You can never anticipate the future, and terrible conditions can wreck even the best-intentioned and mindful understudy borrower.

On the off chance that you do choose to co-sign on an advance (or some other advance, so far as that is concerned), ensure you plainly comprehend what your obligations are and under what conditions you would be required to assume control over the note:

1) Have a firm comprehension with your essential borrower about the reimbursement design – you may even need to consider putting a marked, composed assention set up among you – and remain in contact with the moneylender to ensure that the month to month credit installments are being gotten on time and as concurred. In the event that your essential borrower misses an installment date, get in touch with her or him promptly to examine the issue.

2) Work with the moneylender to guarantee that you get copy duplicates of month to month articulations, and intermittently check your credit answer to ensure your credit is still on favorable terms. Additionally, remember that being a co-endorser on an extraordinary advance may lessen your general financial soundness since the credit obligation will be seen as a risk.

3) If your essential borrower imparts to you that s/he is experiencing issues influencing the month to month advance installments, to contact the loan specialist instantly. For government school advances, get some information about your advance postponement and restraint alternatives. Private understudy advances for the most part don’t offer a similar delay and restraint benefits as government understudy credits, however some private understudy advance loan specialists might talk about a conceded installment course of action or option installment design.

4) If your essential borrower misses an installment or quits making installments inside and out, you’ll be relied upon to assume control over the advance installments. You may have legitimate recourses as to the borrower, yet those are separate from the lawful commitments of the credit itself. The bank will be looking to you, as a co-underwriter, to make the month to month advance installments until the point when the essential borrower can continue duty regarding making the installments her or himself.

Irish Economy: a longer view

Yesterday I was asked to give a quick talk to the Marketing Institute – at a lovely breakfast gathering – on my view of Ireland’s economic prospects. Here are the notes from my speech:

First, ‘we are where we are’…

Fiscal problem – the real crisis:

  • 2013= Euro 131bn or 91% of 2009 GNP, Euro 47,640 per adult person in debt. We will be spending 21.1% of our 2009 tax revenue servicing this debt – these are DofF projections-based estimates without Nama.
  • With Nama up to 204bn in 2013, 140% of 2009 GNP or 74,200 euro per adult person. We will be spending 33% of our 2009 tax revenue on servicing the debt.
  • In effect, Ireland’s debt servicing charge alone will be bigger than the entire health and social welfare bill today.
  • It pays for three things – services (some we need, others we can do without), social welfare (mostly excessive in levels) and public sector wages and pensions (absurdly excessive burden). Not a hell of a lot for the loot they collect.

Implications:

  • Credit conditions will remain very tight in the country so old model of credit-fueled growth is out of the window.
  • Households spending will be down, savings will rise, but capital will outflow abroad as banks lending abroad will increase.
  • There will be net emigration out of Ireland and inward migration into Dublin.
  • Higher taxes are here to stay.
  • Opportunities will be limited on public and private sectors sides.
  • Irish businesses will be locked in a zero sum game where domestic growth of one company will require domestic losses in another.

Nama problem: a sound of vaporized wealth

  • The net cost is likely to be staggering – ca €6,000-12,000 per working-age adult person under benign assumptions.
  • Economic cost will be even higher due to zombie banks, zombie developers.
  • Even if Nama improves credit supply (doubtful for several reasons) it will destroy credit demand (no deleveraging is possible for the households).
  • Investment will be limited to firms with international markets exposure, which means business models will have to change.
  • We will be exporting brighter younger people, to be replaced by marginally brighter than the remaining Irish workers younger foreigners from the fringes of Europe and outside the EU – this means our business models will have to change. New consumers will spend minimum in Ireland and will expatriate more cash out in fear of immigration policy reversals and rising nationalism.
  • Public sector will remain unreformed, if slightly demoralized, by failed efforts of introducing small reforms. Which means our business models will have to change for all those who relied on public contracts.

Economy’s problems: dead end in sight?

  • What is our ‘next big thing’? Do you know? I can’t see one.
  • Is it ‘knowledge economy’? Not likely – late to the races, high taxes, wrong taxes, power rests with entrenched Social Partners (older, non-productive, fearful of competition). We over-rely on Government sponsored research. Private sector in Ireland is adaptive, not creative, which means it does not want to waste money on longer-term research projects.
  • Knowledge economy will be happening in only a few bright spots: international finance will be back (can you leverage anything to get into this field?); few internationally traded services (TCD, UCD in education, some smaller education players; may be some private medicine, though unlikely; legal and tax services – but only domiciling into Ireland. One big and growing bright spot might be in MNCs shifting more into traded services areas (IBM model for some, start-up Googlelites, Facebookers etc).
  • Domestic economy will see decline of the Irish Brands – we will be more Anglocized in terms of our consumption patterns, especially if Northern Ireland continues to open up to business.
  • Is the future a ‘Green economy’? well, sort of – only with much fewer wind mills and other traditional ‘green’ production firms. Instead, there is room for using our countryside much smarter than we’ve been doing so far – tourism, smart and recovery health tourism and work-and-play tourism have some future, if we can clean up our act on bungalow blitz and passage rights with farmers. Also, smaller boutique producers of ‘green’ agricultural products have a future. But these are all small fry to sustain real growth. Spirit of Ireland is a good initiative, but will it fly or will ESB cronies shut it down?
  • On house prices and property prices: peak to trough fall of 50-60% on average. Equilibrium, or long-run prices should be at 3.5-4 times average income. This roughly means 210-240,000 per house. This will be our long-time average. Trough will undershoot this target, so we can see 200,000 tested.

Business environment: exit the stage

  • Indigenous firms will not be looking at higher margin activities, e.g strategy and market expansion at home.
  • Companies will be retooling to grow abroad.
  • Europe will continue pursuing regulated markets model – can we get any value out of this? Not likely – loads of competitors closer to the feeding trough and loss of our own agility can spell a disaster for out incoming FDI.
  • What do businesses need to grow in this environment – step out of the shell of ‘we are Irish, we are European’ and go for ‘we can bring you into Europe, help you grow in here and keep you as a happy client’ – don’t forget to translate this into Chinese?


Alternatives to a slump: Doing the right thing

Reform public sector and policymaking: Introduce separation of payer and provider in public services. Let the state pay for access to service while we, the private sector, provide such services – growth opportunity space is converting some 20-25% of our GDP into world class competitive services and growing them by adding non-public customers.
Examples:
– Medical tourism
– Education
– Legal domiciling
– Logistics and distribution services
– Outsourced sales
– Marketing and advertising outsourcing?

Reduce the size of public sector and use this reduction to cut taxes on personal income at the upper margins. This introduces proper incentives for investment in Human Capital. It also feeds growing education sector that is actually productive.

Eliminate reliance on outsourcing bodies (Quangoes, FAS, Forfas and Social Partnership) in setting public policies. Rebate savings to taxpayers, but also force more direct democratic interactions between people and policies. Require that best practice analysis and economic feasibility (including environmental and social impact assessment) must be performed for any Government ‘investment’ – this improves quality of investment and returns.

Ireland as Western Hong Kong model

Make public procurement and salaries and wages costs transparent – publish them on the web.

Introduce Land Value Tax – infrastructure returns, reduced speculative holdings of land.

Abandon national spatial strategies – focus on Dublin, Cork, Galway and Limerick. This simply reflects the reality of where growth will be concentrated.

Reform immigration policies: we will still depend on inflow of talented foreigners, but we must incentivise these flows:

  • Create a meaningful Green Card – giving people full rights (save for voting) and allowing them to travel visa-free across the EU (Schengen plus UK). Green Card should be issued for 1 year, then 3 years, then permanent.
  • Allow no access to welfare of any kind for the first 5 years of residence for all foreign nationals. Sign bilateral agreements with other EU states whereby Irish Government will as EU states to pay for their citizens’ access to social welfare and unemployment assistance and in exchange Ireland will assume provision of those services for Irish citizens abroad.
  • Have language and educational/experience – tested system of admissions (not a sole route for entry, but one of them).
  • Streamline citizenship naturalization to reduce red tape. Access to naturalization should be allowed on the points system basis – number of years in residence in Ireland, having Irish family members, employment type etc should add points and speed up both naturalization eligibility and the processing time to naturalization.

Reform bankruptcy and directors laws:

  • We must allow those who try and fail to get up back on their feet, so personal and business bankruptcy restrictions should apply for 1 year at most, the record of bankruptcy should apply only for 3 years. It should be fully cleared after 3 years.
  • Stop the idiotic practice of pursuing people personal assets in collection of mortgage arrears.
  • Directorship disqualifications must be reduced to cases of clear abuse.

Reform regulatory systems:

  • Link regulators pay and pensions to their performance in office – assessable by the independent review board. If we pay them well, they should perform well.
  • Reduce the number of regulators – does a small-town economy really need a Taxi Regulator? a SMS Regulator? and so on.

Reform banking:

  • Most of reform will come from abroad – EU, G20, Basle III. Most of these reform will be painful and costly – Nama Squared?
  • Domestic reforms must include:
  1. Breaking a cozy ‘Old Boys’ cartel between banks and other elites. Sadly – we have no record of doing this even after all the banking scandals of the past;
  2. Introducing more competitive domestic banking by reducing market shares of Irish banks – sadly, we have no record of doing this either;
  3. Using Nama to bring more transparency into Irish banking – sadly, we are doing the opposite.

Hope is in a short supply, treat it carefully. We need some serious drastic changes and these will have to take place at the head of the table.

100 years ago

NPR : Lessons from Wall Street’s ‘Panic of 1907’:

“On Oct. 17, 1907, panic began to spread on Wall Street after two men tried to corner the copper market. In the months preceding the panic, the stock market was shaky at best; banks and securities firms were contending with major liquidity problems. By mid-October, Wall Street was paralyzed; for days, there were runs on several large banks. Millions of dollars were withdrawn, and banks closed their doors. New York City was on the brink of bankruptcy. By 1908, there was a severe but short-lived recession. The man who saved the day was J.P. Morgan, who brought together leading financiers and banks to bail out the ailing market.”

Move forward 100 years and the news has an eery resemblance. From Reuters via Yahoo:

“Major banks including Citigroup Inc are looking at setting up a roughly $80 billion fund to buy ailing mortgage securities and other assets, in a bid to prevent the credit crunch from further hurting the global economy, sources familiar with the matter said.”

TradeSports Pays a fine to CFTC

Thanks to Chris Masse for pointing me to it this interesting story. TradeSports got fined for trading option contracts to US citizens without regulatory approval and oversight.

From the CFTC’s press release:

“The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing and simultaneous settlement of charges under the Commodity Exchange Act (CEA) that Trade Exchange Network Limited (TEN), a limited liability company based in Dublin, Ireland, solicited and accepted orders from U.S. residents for commodity option contracts that were not excepted or exempted from the Commission’s ban on options. TEN owns and operates an Internet-based trading platform that facilitates trading through its websites www.Tradesports.com, www.Intrade.com, and www.TradebetX.com.”

The full statement.

By the way, Tradesports and other so-called decision markets are an excellent way to learn about how markets work. For instance how neew information gets incorporated into the price.

Wall Street’s Highest Earners – Forbes.com

Wall Street’s Highest Earners – Forbes.com:

A look at hedge fund pay. It staggers my imagination.

“The $10.3 billion in pay for the 20 highest earners was down 45% from 2007 and 22% from 2006”

But not all were down. Take for instance James Simons:

“James Simons, who runs Renaissance Technologies…, tops our list with earnings of $2.8 billion in 2008, even though two of his three funds were down for the year. The exception was his Medallion fund, which grew a staggering 84%, even after deducting its steep fees–44% of profits and 5% of assets (the industry standards are 20% and 2%)….

Simons, a former Defense Department code-breaker and mathematics professor at the State University of New York at Stony Brook, uses complex quantitative models to identify companies that are misvalued. He made $1.3 billion from his estimated 40% share of the company’s fees and $1.6 billion on the appreciation of his own investments within the funds he manages”

Does Wall Street Need an Estrogen Injection? – Opinionator Blog – NYTimes.com

Does Wall Street Need an Estrogen Injection? – Opinionator Blog – NYTimes.com: "There has never been a woman chief executive of a major Wall Street securities firm, and there is unlikely to be one anytime soon. The number of senior women executives in finance has always been small and the financial crisis has pared their ranks further. Among the most prominent casualties was Erin Callan, the