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.
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
The policies raise separate issues in my mind. One is horrible economic policy that demeans our democracy; the other is a reasonable and perhaps long-overdue step. The White House action to limit the amount of pay at the seven firms receiving government assistance, and to reverse pay decisions made only a few weeks ago, is transparently political, and that is the only thing transparent about it. The political objectives are to increase the President's popularity (everyone hates Wall Street these days) and to send Wall Street a message: "stop opposing 'change'". This policy will hobble the ability of these seven… Read more
There are means other than draconian limits on size to credibly prevent government bailouts of large institutions. And there are large social gains from retaining large, complex, global financial institutions. As I argue more at length elsewhere, it is worth preserving large financial institutions four reasons. First and foremost, financial institutions need to be large to operate with global scope because their clients are large and global. Small, local banks simply could not provide global corporations the same physical capabilities for trade finance, foreign exchange contracting, and global capital access that large global financial institutions can. Second, there are production economies of scope that offer benefits… Read more
I think there is a good case to be made for a protracted period of above-average savings from disposable income. As I pointed out the last time we discussed this topic, savings behavior is a forward-looking decision about building (or rebuilding) wealth. Therefore, it will depend crucially on employment, income growth, and asset prices. If the economy grows slowly coming out of the recession, and job growth is delayed, and asset prices remain flat, savings out of disposable income will remain high as workers protect themselves from the unknown and try to rebuild their retirement wealth through savings from disposable income.… Read more
I support the idea of creating better resolution mechanisms for banks and nonbanks that would resolve problems associated with allowing them to fail. But the devil is in the details. Some approaches to designing this new resolution mechanism – specifically, those that would vest discretionary resolution authority in the Fed or any other government authority – would likely make the too-big-to-fail problem worse because those government authorities would be correctly perceived as more inclined and able to use public funds to bail out large complex institutions. Furthermore, it would be extremely unwise to ask the Fed to manage resolution… Read more
The analysis by Cogan, Taylor and Wieland is extremely credible and balanced. This package never made sense as a stimulus, and obviously has not and will not stimulate growth.The speech by Christie Romer reflects her position in the Obama Administration and should not be taken as a scientifically based opinion. If you doubt me, just look at the CEA's unbelievably high estimates for growth over the next decade. Of course, some will say that it is hard to hold any of that against her; the mission of the CEA in recent times seems to be little more than to put lipstick on the pig… Read more
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;} Professor Krugman's article, like much of his journalism, was hastily drafted and factually incorrect. He presents a caricature of the finance and economics professions and shows little knowlege of what actually went wrong with the markets and how much the sources of the crisis had been causes of concern by economists prior to the crisis. One of the most humorous aspects of the article was its… Read more
The first stimulus could have focused more on helping bolster the states' finances, but the President was intent on micromanaging the states' spending programs by encouraging them to tailor spending to his preferences. That resulted in spending assistance that will be too late and too large (a "lose-lose" outcome that will do little to help states during the recession and worsen the mounting government debt problems over the medium and long runs). It would have been better to give broader assistance more quickly and on a smaller scale. But it does not follow that now we should add to spending with a second additional… Read more
Updated at 2:48 p.m. on Aug. 18. Deficits are looming large going forward and for the first time we are at risk of reaching unsustainable levels, meaning levels that will require inflationary monetization. The underlying problem results from a combination of three factors: (1) a lack of any progress in reining in the costs of Medicare and Social Security over the past decade and no apparent political will to implement reforms now, (2) an acceleration in on-balance sheet government spending, which began under the Bush Administration and is increasing under the current Administration, and (3) anti-growth policies of the Obama… Read more
There are two parts to the answer to this question. Mechanically, the Fed can manage the process of reducing its balance sheet through a combination of lowering interest payments on reserves and selling assets. So in a mechanical sense the answer to the question is clearly yes. But politically and economically this could prove difficult. Economically, there will be costs to selling some securities and incurring capital losses (that is, on the ones the Fed has been propping up by buying), and the Fed may not want to incur large capital losses for political reasons. More broadly, given the huge… Read more
Updated at 12:36 p.m. on Aug. 3. As I pointed out in a prior posting, household savings from disposable income is rising to replace lost wealth. The dismal prospects for economic growth and for continuing rises in the stock market and in commercial property, along with the slow growth in employment that will accompany the meager gains in income and wealth, will keep personal savings high. The increases in house prices, in contrast, will have little effect on savings, since housing wealth effects on consumption are close to zero (see the recent article on this topic by Stanley Longhofer, William… Read more
There are two ways to define savings, the conventional and misleading way (the amount not consumed out of disposable income), and the economically meaningful way (the overall change in wealth that results from the sum of the appreciation of assets plus the amount not consumed out of disposable income). Individual (and aggregate) savings behavior targets the accumulation of wealth, and the latter definition of savings is thus the economically relevant one. If the the value of corporate stocks rises and is expected to remain high, then this form of "savings" reduces the need for the holders of those assets to accumulate… Read more
Greg Mankiw's diagram showing the inaccuracy of the Obama Adminsitration's employment projections is wonderfully illustrative, but no surprise. The boondoggle "stimulus" package was a waste of money that never had a credible chance of preventing the short-term rise in unemployment and worsening of the recession in 2009. It was the prime example of what the Obama Administration calls "using the crisis" as an excuse to justify passing long-term measures (and the requisite pork it takes to pass them) that are really intended to permanently increase the scope of government and to redestribute wealth ("spreading it around"), which are its core… Read more
Despite the initial positive reaction of the market, and despite heroic efforts by Secretary Geithner to be creative in the drafting of a plan, the plan will probably not work. The plan hopes to partner with the private sector to purchase distressed assets that are currently trading at far below their recovery values. These underpriced toxic assets have been depressing bank stock prices, and making banks unable to lend or raise new capital. The key problem with the plan is that it will not have much of an effect on subprime-related asset prices, and therefore, will not help the banks'… Read more
Abraham Lincoln cautioned politicians against thinking that they could make a career from fooling people. The American people are not so foolish as to believe that they can have the package of benefits that the government has promised them without huge increases in tax burdens. We knew that before the recent collapse in wealth, which has made the unpleasant arithmetic of entitlements even worse. A politician that persists in telling the American people otherwise will do nothing for consumer or business confidence, but he will succeed in making himself a laughing stock. … Read more
The whole premise of this question is strange. Democracy is a process, not an outcome. It of course can survive and has survived in the absence of capitalism. Indeed, one of the earliest forms of democracy that evolved in ancient Greece (in Sparta) was completely antagonistic to capitalism. Capitalism matters (beyond its obvious material advantages, noted by economic historians) because it is the "fuel" of economic freedom, and economic freedom is necessary to any meaningful conception of individual freedom, as philosophers and historians have long noted. Individual freedom is the outcome that matters. Democracy has generally been a necessary condition to produce… Read more
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