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John Lounsbury

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  • Why Wall Street Will Need More Capital: 12th Street Capital Reviews FASB 166 and 167 [View article]
    Larry - - -

    These off-balance sheet assets are called Special Investment Vehicles, SIVs. I have often had the thought how appropriate it would be to use the acronym SHIV, referring to a weapon of choice by street muggers.
    Nov 4 02:07 PM | 4 Likes Like |Link to Comment
  • Why President Obama's Proposed Regulations Subsidize Bank Investment [View article]
    The basic trade-off that will determine how investment in banks will perform is (1) the positive effect of reduced shareholder liability vs. (2) the negative effect of regulation on profitability. If (1) dominates, Alex is correct. If (2) dominates......

    The question of regulation centers on what is regulated. If risk taking is limited, and that is the popular view of increased regulation, won't the potential for profit be limited? I don't want to argue that reduced risk taking from some of the extremes we have seen in the past 20 years is not a good thing. I do want to argue about how that should be accomplished.

    I would argue that allowing too big to fail institutions to exist with "adequate regulation" is the wrong course to follow. I know the argument that size is needed for the efficient operation of globalized business relationships. (That might be debatable, too, but I'll pass on that for now.) But, from a free market purity point of view, how can markets be free when they are controlled by government regulated monopolies?

    Alex has made a very good argument. I just think the argument can be extended. One can take the counter argument that would unleash competition, and ultimately, therefore, increase the universe of earnings. The counter argument would say that it is better to ensure too big to fail can not exist rather than allowing these oligarchs to continue with regulation of risk.
    Jun 19 10:26 AM | Likes Like |Link to Comment
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