Peter Wallison, Chair, Financial Policy Studies, American Enterprise Institute
Biography provided by participant
Peter J. Wallison holds the Arthur F. Burns Chair in Financial Policy Studies and is co-director of AEI's program on financial markets deregulation. Prior to joining AEI, he practiced banking, corporate, and financial law at Gibson, Dunn & Crutcher in Washington, D.C., and New York. Mr. Wallison has held a number of government positions. From June 1981 to January 1985, he was general counsel of the United States Treasury Department, where he had a significant role in the development of the Reagan administration's proposals for deregulation in the financial services industry, served as general counsel to the Depository Institutions Deregulation Committee, and participated in the Treasury Department's efforts to deal with the debt held by less-developed countries. During 1986 and 1987, Mr. Wallison was White House counsel to President Ronald Reagan. Between 1972 and 1976, Mr. Wallison served first as special assistant to New York's Gov. Nelson A. Rockefeller and, subsequently, as counsel to Mr. Rockefeller when he was vice president of the United States. Wallison is admitted to practice before the courts of the District of Columbia, and he is a member of the District of Columbia Bar Association. He received his undergraduate degree from Harvard College in 1963 and law degree from Harvard Law School in 1966.
Mr. Wallison is the author of Ronald Reagan: The Power of Conviction and the Success of His Presidency (2002) by Westview Press. On financial or regulatory matters, he is the author of Back From the Brink (1990), a proposal for a private deposit insurance system, and coauthor of Nationalizing Mortgage Risk: The Growth of Fannie Mae and Freddie Mac (2000), The GAAP Gap: Corporate Disclosure in the Internet Age (2000), and Competitive Equity: A Better Way to Organize Mutual Funds (2007), all published by AEI Press. He is the editor of Optional Federal Chartering and Regulation of Insurance Companies (2000) and Serving Two Masters, Yet Out of Control: Fannie Mae and Freddie Mac (2001), also published by AEI Press.
The Obama plan is a prescription for moral hazard. Secretary Geithner’s testimony last week suggests that the administration has given up on designating “systemically significant” firms in advance. Surrendering on this point was inevitable, since many in Congress saw that the administration’s poorly conceived idea would simply create Fannies and Freddies in every sector of the financial economy where those Tier 1 financial holding companies were operating. But Secretary Geithner appears not to have given up yet on the idea of subjecting systemically significant companies to tough regulation and resolving them through use of a government agency instead of the… Read more
It’s important to recognize that the US financial crisis is sui generis, and did not arise from a defect in our financial system, let alone the capitalist system. It was caused by a vast number of subprime and other nonprime mortgages—25 million with an aggregate value of about $4.5 trillion—that are defaulting at unprecedented rates. This is almost 50% of all outstanding mortgages in the US. Many other developed countries had housing bubbles, but have not been afflicted by the same number of defaults as their housing bubbles deflated. That’s why the US economy, uncharacteristically, may be recovering more slowly… Read more
Although it’s possible to define systemic risk in words, it is impossible to know in advance whether the failure of a particular financial firm will cause a systemic breakdown. Our inability to predict whether a particular firm’s failure will have systemic effects has important policy implications. The administration has proposed that the government have authority to take over and resolve all financial firms that are likely to cause systemic instability if they fail. If we give the government this authority, we should recognize that officials will not be able to tell when it is appropriate to use it, nor will… Read more
New Plan, Old Fears By Peter J. Wallison Tuesday, March 24, 2009 Filed under: Economic Policy The Geithner plan is particularly vulnerable to the kind of criticism that might chase away private investors. In response to public outrage about bonuses paid out by American International Group, Congress is now working feverishly on legislation that would penalize the workers at banks and other companies that have received funds from the Troubled Asset Relief Program (TARP). This must be one of the most disheartening episodes ever witnessed in Congress, not because the bonuses deserve support but because our representatives are structuring… Read more
One of the silliest statements ever to appear and be repeated in the press is the idea that the current financial crisis is a “crisis of capitalism.” Yes, it might truly be a crisis of capitalism if people want to—or to continue to—live in poverty; if they have no interest in science or truth, or learning, or human technological progress; if they expect the fruits of the earth to be handed to them by others, without any risk or any work on their part; and if they cannot think or act for themselves, but expect others to make their life… Read more
Based on his speech and the accompanying fact sheet, it appears that the principal money element of the Geithner plan for rescuing the banks involves the creation some kind of public/private partnership to buy the banks’ so-called toxic assets. Involving the private sector will make the problem considerably worse, and a recognition of this is probably one of the reasons that it landed with a classic dead cat bounce on Wall Street. The apparent reason for enlisting private investors is to get them make the pricing decision, and is an excruciatingly bad idea. The reason that Congress appropriated money for… Read more
Biography provided by participant
