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Charles Calomiris, Professor of Financial Institutions, Columbia University

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Charles W. Calomiris is the Henry Kaufman Professor of Financial Institutions at the Columbia University Graduate School of Business and a Professor at Columbia's School of International and Public Affairs. He also serves as the Academic Director of the Chazen Institute of International Business, and of the Center for International Business Economics and Research, at Columbia. Professor Calomiris co-directs the Project on Financial Deregulation at the American Enterprise Institute and is the Arthur Burns Scholar in International Economics at AEI. He was a member of the Shadow Financial Regulatory Committee from 1997-2004, is a Research Associate of the National Bureau of Economic Research, and was a Senior Fellow at the Council on Foreign Relations. He is Chairman of the Board of Greater Atlantic Financial Corporation, a publicly traded bank based in the Washington D.C. metropolitan area, and a Managing Partner of Gauss Fund, LP. Professor Calomiris served on the International Financial Institution Advisory Commission, a Congressional commission to advise the U.S. government on the reform of the IMF, the World Bank, the regional development banks, and the WTO. His research spans several areas, including banking, corporate finance, financial history, and monetary economics. He received a B.A. in economics from Yale University in 1979 and a Ph.D. in economics from Stanford University in 1985. His recent publications include: U.S. Bank Deregulation in Historical Perspective (Cambridge University Press, 2000), Emerging Financial Markets (with David Beim, Irwin-McGraw Hill, 2001), "Consequences of Bank Distress During the Great Depression" (with Joseph Mason), in the American Economic Review (June 2003), "Fundamentals, Panics, and Bank Distress During the Depression" (with Joseph Mason), in the American Economic Review (December 2003.) Calomiris is the recipient of research grants or awards from the National Science Foundation, the World Bank, the Japanese Government, the Herbert V. Prochnow Foundation, and the Garn Institute of Finance. He is or has been a member of the editorial boards of the Journal of Banking and Finance, the Journal of Financial Services Research, the Journal of Financial Intermediation, the Journal of Economic History, the Journal of Economics and Business, and Explorations in Economic History. Calomiris serves or has served as a consultant or visiting scholar for the Federal Reserve Banks of New York, Chicago, Cleveland, St. Louis, and Philadelphia, the Federal Reserve Board, the World Bank, and the governments of Mexico, Argentina, Japan, China, El Salvador, Connecticut and Massachusetts.

Recent Responses

November 8, 2010 09:10 AM

RE: What Are the Prospects for 'Balanced' Growth?

Hypocrisy that is also bad economics The Asian (and European and Latin American) complaints are valid. Not only is the Fed's strategy likely to do little good in stimulating growth, it could potentially do great harm, even in the short term, by causing further dollar depreciation, triggering trade disputes and capital controls abroad (as it already has), and making it harder to achieve concessions from other countries that would help rebalance global demand. In the longer term, the QE II policy is very risky, since it exposes the US to inflation risk, notwithstanding the overly optimistic assurances from the Fed…  Read more

October 12, 2010 07:51 AM

RE: Any Silver Linings In Jobs Report?

There's Work To Do  No, there is no silver lining here. Employment is moving sideways and will continue doing so until businesses see a future with well-defined and reasonable taxes, a regulatory regime for healthcare and banking that is clear and conducive to hiring, a government spending reform plan that will make the debt path of the US government debt sustainable, and a monetary policy committed to price stability. It is high time that economists of all political stripes come together to identify these issues so that we can achieve the non-partisan reforms that common sense demands, and the American…  Read more

October 4, 2010 08:01 AM

RE: How Would You Steer Fed On Quantitative Easing?

The Long-Term Danger  We are in a slow-growth equilibrium, reflecting huge tax and regulatory policy uncertainties, among other things. The problem is not a deficiency of demand relative to supply, but rather a deficiency of supply. It is true that an inflationary shock would temporarily boost output, but it would also create adverse long-term consequences. The Fed should target a 1 percent measured inflation rate, and not try to boost the economy with inflation.   The key question, then, is whether more quantitative easing is needed to get us to that target. It is very hard to say for sure,…  Read more

September 27, 2010 10:01 AM

RE: How Would GOP's 'Pledge' Affect Economy?

Very Good Start, But More Needed  This is a very good start, and would lead to immediate acceleration of economic growth and significant improvement in the creation of jobs over the next year. Much more is needed to bring the government's long-run spending obligations down to a realistic level, so that growth can really take off. The cuts in entitlements must be in the tens of trillions (in present value) spread over many years, but this is what it will take to solve our long-run government insolvency problem.…  Read more

September 20, 2010 08:02 AM

RE: How To Put Businesses' Cash Reserves In Play?

An Uncertain Climate  Primarily, uncertainty is holding back investors. This includes uncertainty about personal taxes, healthcare costs, new government spending programs (that would likely be wasteful and put the country deeper in debt), environmental taxes, questions of long-term credit access (especially given the still unknown implementation of the horrific Dodd-Frank bill), and about how the US government will resolve its current unsustainable promises going forward. More broadly, the problem is an administration and Congress that are unpredictable, unwise, hostile to business, and indifferent to economic growth. Why would anyone be rushing to invest?…  Read more

August 23, 2010 02:00 PM

RE: Do Tax Rebates Work?

Poorly designed for stimulus Normal 0 false false false MicrosoftInternetExplorer4 st1:*{behavior:url(#ieooui) } /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman"; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;} Tax policy is an area of economics where evidence and theory agree: long-lived, anticipated cuts in tax rates predictably affect behavior, but short-lived cuts in taxes, especially if they are not related to tax rates (e.g., lump-sum rebates), will not have much effect. The remarkable thing about the recent tax cuts -- Bush's in 2008 and Obama's in 2009 -- is how poorly designed they were (in…  Read more

July 6, 2010 09:32 AM

RE: Pause Or Stall?

Recovery Will Continue, Slowly I don't see the recent news as a big surprise or a reason for any new pessimism. The recovery and expansion will be slow but will continue, despite the horrible US policy environment of high and unpredictable taxes, unpredictable and potentially costly regulatory changes in finance, health care and environmental policy, and high inflation risk. Europe's problems will deepen, but this will not produce a double dip in the US. But slow US growth will prevent the normal bounce from the recession, and will keep jobs growth low for the forseeable future. The long-term unemployed (of…  Read more

June 28, 2010 08:44 AM

RE: Should The Rich Pay More?

Not Just Unfair, But Dangerous It is neither fair nor efficient to widen the disparity in taxation further, but it is likely to happen, and not just because of President Obama's redistributionist proclivities. Nearly half of Americans pay no income tax (although they do contribute to Medicare and Social Security taxes). That is not just unfair, it is politically dangerous for a democracy, since it means that a huge proportion of Americans receive services and transfers from their federal government financed by a minority of taxpayers. The temptation of populists to appeal to tax-exempt majorities to support soak-the-rich taxes, rather than spending cuts, is likely…  Read more

June 21, 2010 01:54 PM

RE: Rethinking Economics

Shakeup is Overdue Normal 0 false false false MicrosoftInternetExplorer4 /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman"; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;} To those who have been studying financial crises and banking for the last thirty years, there is nothing new in this one (liquidity risk, credit crunches, banking collapses, global transmission of shocks, and the collapse of money markets all were well known before this crisis). What is new is that financial economists and macroeconomists who ignored these topics for decades now have to come out from hiding beyond simple-minded theories of…  Read more

June 14, 2010 09:29 AM

RE: Obama's $50 Billion Aid To States

A Fiscal Drug Dealer Normal 0 false false false MicrosoftInternetExplorer4 st1:*{behavior:url(#ieooui) } /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman"; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;} The President’s intent seems to be to signal support for fiscal profligacy, encourage the growth of government jobs, rather than private sector jobs, and promote greater dependence on the national government, especially by states that not coincidentally tend to be bastions of support for his party. No surprises there. These White House initiatives show a lack of concern over the fact that the federal government, like many of the high-spending state…  Read more

May 24, 2010 08:49 AM

RE: Greece And Us

A Long-Term Benefit?   The turmoil is Europe will have two opposing effects on the U.S., an adverse short-term effect and a positive long-term effect.   The adverse short-term effect will be the drag on global aggregate demand coming from the disorderly process of deciding how to resolve the economic problems of southern Europe. No matter how the inconsistent arithmetic of the status quo is resolved (whether through deep fiscal cuts and labor market reforms, or bailouts financed either by German and French borrowing or by ECB money printing) the transition to the new equilibrium will be one of very…  Read more

May 3, 2010 08:48 AM

RE: Not To Be Believed

Hit The Agencies Where They Live The presumption in this question is incorrect. As I have shown in my research on the inflation of ratings, investors are well aware of ratings inflation in securitized debts, and this has been an active topic of research for over a decade. Not only are buyers of securitized debts with inflated ratings not fooled, they are the ones who demand inflated ratings, since they are the ones who benefit from them via the relaxation of regulatory limits that otherwise would constrain them more. Those limits include capital requirements, and also quality limits on portfolio…  Read more

April 12, 2010 09:20 AM

RE: Can We Trust The Housing Recovery?

Little Reason To Fear   There is no need for economists to puzzle too long over their navels to figure out why housing prices rose to such high levels in the recent housing boom and bust. Unlike in securities markets, it is not possible to short parcels of property. Negative opinions by relative pessimists are expressed by selling property (during the early phases of a boom). Once all the pessimists have sold, only the optimists get to "vote" on the fair price. This is a common and powerful explanation for why severe bubbles are much more frequently observed in land markets…  Read more

March 22, 2010 09:27 AM

RE: Maestro Looks Back

Many Causes, Including Low Rates Normal 0 false false false MicrosoftInternetExplorer4 /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman"; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;} The Fed’s four-year dramatic departure from the Taylor Rule, allowing the fed funds rate to remain substantially below the levels consistent with the Taylor Rule, very much contributed to the underpricing of risk leading up to the crisis. Many microeconomic studies of loan pricing in various countries provide compelling evidence that the underpricing of risk tends to occur in unusually low interest rate environments.…  Read more

March 15, 2010 09:24 AM

RE: The Savings Rebound That Hasn't Happened

It's Temporary I continue to expect sustained increases in savings, but this should be measured over a long period of time (over several years, not several months). That forecast reflects my pessimistic views about personal wealth creation in the US and elsewhere over the medium term. Individuals will have to rebuild lost wealth, and savings will be their only choice. Recently, writing down or walking away from debt have contributed to increasing personal wealth, and this (along with signs of recovery) may be a reason why savings has not remained high in recent months. To the extent that debt relief…  Read more

March 14, 2010 08:03 AM

RE: Do We Need A Volcker Rule?

A Boon to Foreign Banks The Volcker Rule would be hard to implement, and if one could implement it, it would hobble U.S. banks. It would be difficult to fashion a workable version of the Rule. In executing clients’ transactions, global banks physically have to take positions in their own books. Banks have to take such positions during the day to be able to fulfill their clients’ needs, and they need to be able to manage the risks related to these businesses flexibly. It would be very difficult to fashion rules describing exactly how much risk banks would be permitted to…  Read more

March 1, 2010 09:38 AM

RE: Barro On Stimulus

Policy More Important than Multiplier Normal 0 false false false MicrosoftInternetExplorer4 st1:*{behavior:url(#ieooui) } /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman"; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;} Whether the spending multiplier is 0.4 or 1.5 is simply not a matter that economic science can determine with any confidence, and in any case, the impact would be small and too delayed. The question we should be addressing is this: Given the reasonable doubts about fiscal multipliers, given the costs of expanding spending (especially the protracted delays in implementing spending, and the…  Read more

February 8, 2010 01:57 PM

RE: A Few Questions On Freezing Tax Expenditures

All Expenditures Pork? It's Arguable. I like the idea of capping (even better, reducing) so called "tax expenditures," in general. It would be a desirable reform of our tax system to clarify and expose spending and special interest programs, which would help reduce spending growth, and permit lower tax rates for a given amount of revenue. Those are big pluses. One big practical problem is that tax expenditures reflect the stubbornly dishonest political process of Washington spending; politicians like hiding their special interest spending within the tax code and most of them will not be agreeable to this reform. Perhaps the idea could have a chance if, say, the…  Read more

February 1, 2010 08:36 AM

RE: Feeling Blue

Psychology Not Now the Problem Sentiment, while potentially significant, tends to follow reality. There is no growth mystery regarding the Great Depression. Economic policy was horrible, and I don't just mean the monetary policy blunders that started the Depression, but also the regulatory and tax policies that deepened and prolonged it. The Volcker Rule has little chance of becoming policy because it is unworkable, incoherent and unwise. It also has nothing to do with the recent financial crisis. The advocacy of this policy is a transparent attempt by the Administration to promote the issue of financial reform in a way that they…  Read more

January 19, 2010 09:18 AM

RE: Trouble In Europe?

Muddling Through More Likely Normal 0 false false false MicrosoftInternetExplorer4 st1:*{behavior:url(#ieooui) } /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman"; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;}   Immediately before the launch of the euro, I published an article entitled “The Impending Collapse of the Euro,” which argued that roughly a decade from the date of the establishment of the euro, the economic and monetary union either would see some defections, or would be forced to pursue a path of accelerating inflation, as the result of unsustainable fiscal expenditures of…  Read more

January 6, 2010 02:05 AM

RE: Easy Money And The Housing Bubble

Updated at 9:16 a.m. on Jan. 6. The Fed departed dramatically from the Taylor Rule, keeping the Fed Funds Rate about 2 percentage points lower than it should have been from 2002 to 2005. This and the late 1970s are the only two periods during the postwar era when the real fed funds rate (the nominal rate less expected inflation) was negative for several years in a row. There is no question that a different policy would have been less favorable to the housing bubble, since housing has always been highly sensitive to interest rate movements. It is true that,…  Read more

December 21, 2009 10:34 AM

RE: How To Spur Business Investment?

Normal 0 false false false MicrosoftInternetExplorer4 st1:*{behavior:url(#ieooui) } /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman"; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;} Washington is on a path that will spell much economic pain for many years, with ballooning budget deficits, accelerating inflation and meager business investment by small business, and there is little hope of reversing this path. Even a shift toward Republican leadership in 2013 will not be enough to make a difference unless the new Republican leadership decides to behave very differently that it has in…  Read more

November 30, 2009 07:37 AM

RE: Obama And The Deficit

Washington is in denial, but pretense is not policy, and this will be revealed with the passage of time. We are on an obviously unsustainable path that will prove disastrous for taxation, inflation, and growth. What should we do? Tax rates should not rise, as they are already high enough; instead, spending and spending promises should fall dramatically, and the most important part of that decline has to be in promised healthcare and retirement benefits in the future. Of course, Congress is in the process of doing precisely the opposite. Our country is pretending not to be able to do…  Read more

November 16, 2009 09:05 AM

RE: A New Solution For 'Too Big To Fail'?

I have authored or coauthored numerous articles and a short book on the topic of the merits of requiring some form of subordinated debt as part of a bank's capital structure, which I strongly favor. CCCs are a special kind of sub debt, and probably the best kind to require that banks issue. Because they automatically convert into equity when the bank becomes troubled, there is no hope of avoiding "haircuts" by holders. That is important because it means that the yields on these bonds during normal times will reflect true market perceptions of the underlying risk of the institution…  Read more

November 9, 2009 08:36 AM

RE: Creating Or 'Saving' More Jobs

  Washington thrives on phony numbers produced by political machines that need to make positive headlines (especially when the facts are so bad, as they are these days for the Democrat political machine). The 650,000 number is perhaps the phoniest number of all. As far as we know, the Administration's spending policies have had very little effect on the economy, and perhaps no effect. But economists can say with some certainty that we are suffering negative consequences from the President's pledges to raise taxes dramatically (in the form of higher marginal tax rates on income, and proposed taxation in support of healthcare and environmental initiatives),…  Read more

November 2, 2009 08:51 AM

RE: A BRAC For The Budget

Whether this is a good idea depends on who is pushing for it and why. I served on a Congressional commission (the Meltzer Commission in 1999-2000, on the reform of the IMF, World Bank and other multilateral financial and trade agencies), and I would say that it was one of the more effective commissions in recent years, but that isn't saying much. The work of such a group only has influence if the dominant party wants to (1) appoint real experts, and (2) follow their recommendations. Otherwise, the wisdom of a commission fades quickly no matter how good its analysis.…  Read more

 

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