CFS Financial Crisis Timeline

As the 10-year anniversary of the global financial crisis approaches, assessment of key events before, during, and since is essential for understanding varying dimensions of the crisis.

The CFS Financial Timeline, created and managed by senior fellow Yubo Wang, seamlessly links financial markets, financial institutions, and public policies. It:

  • Covers more than 1,100 international events from early 2007 to the present.
  • Provides an actively maintained, free, and easy-to-use resource to help track developments in markets, the financial system, and forces that impact financial stability.
  • Curates essential inputs on a real time basis from established public sources.

Since 2010, the Timeline has become an integral part of the work done by scholars, students, government officials, and market analysts. View the Timeline.

We hope you find it of use and interest.

UK-US Financial Regulation: The Benefits of Greater Coherence

“UK-US Financial Regulation: The Benefits of Greater Coherence” illustrates the importance of “regulatory coherence” across borders.

Authors Ike Brannon, Bob Jennings, and Julie Chon delve into the longstanding and seminal UK and US relationship from a financial regulatory perspective.  They examine pathways to deepen and formalize cooperation with the aim to strengthen the international financial system.

As always, comments, critique, complement, or alternative thoughts are eagerly sought.

View the paper.
http://www.centerforfinancialstability.org/research/US_UK_Regulatory_Coherence.pdf

Fed Balance Sheet Since 1914

Kurt Schuler (CFS senior fellow in financial history) and students of Steve Hanke (CFS special counselor) converted the Fed’s weekly balance sheet from its beginning into spreadsheet form.

The data should prove useful for anyone concerned with the quantitative study of monetary policy in the United States over the last 100+ years.

Our joint Johns Hopkins / CFS working paper, “The Federal Reserve System’s Weekly Balance Sheet since 1914,” is available here.

Accompanying Spreadsheets

Similarly, Bank of England’s Ryland Thomas informs of an improved balance sheet dataset for the Bank and new paper “The Bank of England as lender of last resort: new historical evidence from daily transactional data.”

Bondi Testimony on SEC Seform

CFS senior fellow Bradley J. Bondi testified before the U.S. House of Representatives Subcommittee on Capital Markets, Securities, and Investment at a hearing entitled, “Ensuring Effectiveness, Fairness, and Transparency in Securities Law Enforcement” on June 13, 2018.

In his testimony and written statement, Brad advocated for transparency and reform from the SEC with respect to the imposition of issuer/shareholder penalties and disgorgement, advised against extending the statute of limitations for SEC enforcement actions, and discussed pending legislation to reform SEC administrative proceedings and to preempt enforcement of certain state securities laws.

Testimony and written statement
https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=403565

Bondi’s CFS Ten-Point Blueprint for SEC Reform
http://www.centerforfinancialstability.org/research/Bondi_8_17_17.pdf

Paul Tucker interview on central banking and “Unelected Power”…

The Center for Financial Stability (CFS) thanks Sir Paul Tucker – Former Deputy Governor, Bank of England and Chair, Systemic Risk Council, and Harvard Fellow – for “Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State.”  “Unelected Power” is broad and deep.  It is a joy to read – with priceless quotes and footnotes.

We are grateful to Paul for sitting down with CFS to discuss:

– Governance and central banking,
– A “Money – Credit Constitution” with emphasis on “inside” and “outside” money,
– Division between fiscal and monetary activities,
– Examples of central banking excellence,
– Prospect for normalizing monetary policy,
– Regulatory policy – ten years after the crisis,
– Surprises and motivation for writing “Unelected Power.”

The following are excerpts from the conversation.
http://centerforfinancialstability.org/research/Tucker_Unelected_Power.pdf

Global Markets into 2018

The Center for Financial Stability (CFS) hosted a small private workshop for leaders in finance to delve into issues that will shape the future of asset values and investment management on December 6.

CFS Special Counselor Jack Malvey set the stage with an essay “Toward the Mid-21 st Century Global Financial System” –
www.CenterforFinancialStability.org/research/MalveyGlobal_Dec_2017.pdf

Workshop topics included:

– Geopolitics and Big Picture Challenges through 2020 – AI, cyber, etc;
– Global Macro, Quantitative Tightening, and Financial Stability;
– Financial Industry Transitions – Active versus Passive Management, etc; and
– Opportunities and Risks (a selection follows).

OPPORTUNITIES

– Buy cash today – the rate of return will be extraordinarily high.
– Central banks will more actively incorporate financial stability into actions and mandates.
– Emerging markets will outperform.
– The Fed desires to move further away from the zero lower bound.
– NPLs in China are overstated / bank earnings mitigate and neutralize risks.
– Global macro investment opportunities via uneven tightening.

RISKS

– I will buy cash – but tomorrow.
– Bitcoin correction.
– Limited attractive equity names based on valuation / similar to Tokyo in 1989.
– Geopolitical tensions will increase with North Korea, China, Russia, and Saudi Arabia.
– Inflation surprise / data may be misread.
– Artificial intelligence channeled for ill.

Best wishes into the Holiday Season and 2018!

Congrats Randal Quarles on Fed Appointment…

Featured

Congratulations to Randy Quarles for his appointment and confirmation to serve as the Vice Chairman of the Federal Reserve Board.

CFS is thankful for Randy’s early and constant support of our organization. As an Advisory Board Member and Trustee, he has been a source of wisdom on a wide range of topics. In particular, his involvement in “Bretton Woods: The Founders and Future” was especially productive and meaningful. The inspiration and encouragement from Randy will continue to guide CFS especially as we plan to honor the 75th anniversary of the birth of the international financial system and think strategically about the future.

See “Summary and Next Steps  – Bretton Woods: The Founders and Future.”

Randy is uniquely experienced, remarkably learned, and thoughtful on virtually any monetary, regulatory, or related legal topic. Likewise, few to none are more honorable in character.

We wish him the best at the Fed.

Index Investing and Active Management…

The asset management industry has been disrupted by the trend toward increased index investing.  Over the years, CFS has explored this phenomenon.  As we look to dig deeper, we encourage members and friends to share insights, papers, or studies.

Although it is rare for us to distribute company research, BlackRock’s “Index Investing Supports Vibrant Capital Markets” is well worth a read.  The piece addresses many elements in the active versus passive debate as well as establishes useful concepts from a practitioners’ point of view.

Key themes include:

  • Index investing is still small or less than 20% of global equities,
  • Asset owners and managers sport different strategies and interests,
  • The balance between active and index management may ultimately be self regulating,
  • Passive owner corporate voting records are mixed between favoring both management versus activist investors.

As the trend will influence the future of the industry, many have raised questions regarding the impact of the move toward index investing in financial stability more broadly.

CFS welcomes and encourages view points and research on all sides of the discussion.  Please email any papers to Lauren Cooper, manager of communications (lcooper@the-cfs.org) or me.

“Index Investing Supports Vibrant Capital Markets” can be found at:
https://www.blackrock.com/corporate/en-us/literature/whitepaper/viewpoint-index-investing-supports-vibrant-capital-markets-oct-2017.pdf

From China / Market Implications from Unconventional Monetary Policies…

The Shanghai Development Research Foundation (SDRF) recently hosted a superb dialog on issues stretching from China, the international monetary system, re-thinking the nature of money, among others.  I had the pleasure of presenting on “Market Implications from Unconventional Monetary Policies.”

My remarks centered on:

The need to assess the normalization of monetary policies through the lens of major macro shifts over the last 10 years.

Specifically, three “never befores” need to be resolved.  For instance, “never before” has there been such 1) large scale intervention by central banks and governments; 2) growth in the financial regulatory apparatus and labyrinth of rules governing markets; and 3) distortions across a wide range of financial markets.

Here, CFS monetary and financial data illustrate why goods price inflation has remained subdued and – in contrast – asset price inflation has not.

Evaluation of long-term stock and bond market valuations reveal market distortions.

Speculative positioning has been actively influenced by the patterns of rise and restraint in balance sheet operations in recent years.

Going forward, officials would benefit by seeking balance among these three “never before” forces.

For slides accompanying the presentation:  http://www.centerforfinancialstability.org/speeches/ShanghaiDRF_090517.pdf

On a parenthetical note, I left China excited with advances in mobile pay.  It will redefine the nature of money.

Barbara Novick Joins the Advisory Board of the Center for Financial Stability

New York, September 25, 2017/ The Center for Financial Stability (CFS) is honored to announce that Ms. Barbara G. Novick joins its Advisory Board.

Ms. Novick is the Vice Chairman of BlackRock, and a member of BlackRock’s Global Executive Committee, Corporate Risk Committee and Global Operating Committee. From the inception of the firm in 1988 to 2008, Ms. Novick headed the Global Client Group and oversaw global business development, marketing and client service across equity, fixed income, liquidity, alternative investment and real estate products for institutional and individual investors and their intermediaries worldwide. In her current role, Ms. Novick heads the firm’s efforts globally on government relations and public policy. In addition, she serves as a board member to the BlackRock Equity-Liquidity and BlackRock Closed End fund families, and is a member of the Executive Committee of the Investment Company Institute.

Prior to founding BlackRock in 1988, Ms. Novick was a Vice President in the Mortgage Products Group at The First Boston Corporation. Ms. Novick joined First Boston in 1985 where she became head of the Portfolio Products Team. From 1982 to 1985, Ms. Novick was with Morgan Stanley.

Ms. Novick has authored numerous articles on asset management and public policy issues. Ms. Novick is a member of CFA Institute’s Future of Finance Advisory Council and MSCI’s Editorial Advisory Board. She currently serves as a Trustee of Cornell University and the HCM Foundation. Ms. Novick previously served on the boards of Robert Toigo Foundation (2007 – 2010), UJA-Federation (2009 – 2015) and Westchester Day School (2000 – 2005), served as both Treasurer and Trustee of Westchester Jewish Center (1994 – 2012) and coached in the Westchester Youth Soccer League (1999 – 2015). Ms. Novick earned a BA degree, cum laude, in economics from Cornell University.

Ms. Novick joins the 11 distinguished members of the CFS Advisory Board: Eduardo Aninat, Ph.D; Senator Bill Bradley; The Honorable Carole L. Brookins; Peter Flocos, Esq.; Charles Goodhart, CBE, FBA; Henry Kaufman, Ph.D.; Guillermo Ortiz, Ph.D.; Judge Richard A. Posner; The Honorable Randal K. Quarles; Richard L. Sandor, Ph.D., Dr. Sc.h.c.; and Nobel Laureate Myron Scholes, Ph.D.

It is a great joy to welcome Barbara to our Board.