Philip Maymin's blog

The Handcuffed Banker

Originally Published In:

American Banker (3/22/2013)

To the detriment of consumers, innovations in banking tend to be conservative, late, and incremental, despite top talent and plenty of ideas. Is regulation backfiring?

It's now about as hard to innovate in banking as it is with cars.

The problem is not a dearth of ideas: just about anybody you speak with nowadays seems to have a great idea for how to structure mortgages or loans or executive compensation in a way that they think will prevent anything like the modern crisis from happening again. And the problem is not a lack of talent: good salaries continue to attract the world's top programmers and developers to work in various aspects of banking, from IT to research to trading to compliance to operations.

The problem is regulation.

Consider how hard it is to get approval to tweet even something innocuous if you are a banker. Now imagine trying to get approval for a new retail product, especially in the current environment.

Guns, Drugs, and Banks: None Can Be Controlled

Originally Published In:

American Banker (1/24/13)

Why do we instinctively cower to power after financial crises and human tragedies? And what can be done about it?

We must have government banking because of the panics of the nineteenth century. We must have government health care because of the illnesses of the twentieth century. We must have government gun ownership because of the shootings of the twenty-first century.

Following tragedies, people seem to systematically wish to be dominated by authorities, to surrender their own freedom and rob others of theirs. Why?

The Goose That Laid the Federal Reserve Note

Originally Published In:

American Banker (11/30/2012)

This newly discovered, expanded version of Aesop's most famous fable bears an eerie resemblance to the modern day and sheds new light on its tragic moral.

One day a countryman checking his goose's nest found there an egg all green and flattened. When he picked it up, it was as light as air and he was about to throw it away, because he thought a trick had been played on him. But he changed his mind and took it home and soon found to his dismay that it was a pure Federal Reserve note.

His wife had discovered at the same time an unusual egg from her own goose, an egg all yellow and glittering. When she picked it up it was as heavy as lead and she too was going to throw it away, also thinking it was a trick, for their country was apparently as rife in practical jokes as it was in mutated geese. But she took it home on second thought, and soon found to her delight that it was an egg of pure gold.

Let Nobody Serve

Originally Published In: (11/22/12)

One guy beat another guy in vote totals this month, but they both lost, even in their combined total, to None of the Above. For the fourth Presidential election cycle in a row, and the 27th time out of the past 30, most eligible voters opted not to vote.

Since 1896, the candidate with the most votes has gotten an average of 22 percent of eligible voters; all of remaining candidates combined have averaged 20 percent of eligible voters. None of the Above has dominated the past century with a 58 percent average.

A mandate is the implicit support of the people for government policies. When a candidate sweeps into office on a large majority, other elected federal officials, fearing for their own future campaigns, go along with the new proposals. When a candidate earns a meager victory, they are less prone to hop on. Indeed in eight of the last thirty elections, the winning candidate didn't even get a majority among those who chose to vote: his resulting mandates were much weaker.

No Financial Institutions Are Systemically Important

Originally Published In:

American Banker (9/5/2012)

Designating certain companies as systemically important accomplishes nothing more than putting them into a closer relationship with the government, making the designation itself a self-fulfilling prophecy.

The postmodern regulatory approach to banking relies on the idea of systemically important financial institutions.

The Financial Stability Board defines these creatures as financial institutions whose "disorderly failure, because of their size, complexity and systemic interconnectedness, would cause significant disruption to the wider financial system and economic activity."

It's High Time for High-Frequency Banking

Originally Published In:

American Banker (7/24/2012)

You should be able to move your money as fast as you can make it. But the banking system today works about as speedily as the Post Office.

This week, the U.S. Postal Service is threatening to default if Congress does not give it more of our money, while the Office of Financial Research is considering requiring financial companies to turn over your trading and transactions data. When will these dinosaur ideas of centralized mail and money finally go extinct?

Three decades ago you would wait anxiously by your mailbox for important correspondence. Today you can email, fax, text, IM, Skype, Vox, FaceTime, call or poke instantly. Three decades ago you might have even placed trading orders by mail. Today, high frequency trading has come to dominate finance. Professional market makers operate at lags where the speed of light is a legitimate annoyance.

Nudged to Death

Originally Published In:

American Banker (6/27/2012)

From the CFPB to the FSOC to New York's ban on large soda cups, followers of behavioral theory have gone overboard in their rabid enthusiasm for governmental manipulation.

Richard Thaler and Cass Sunstein's best-selling book Nudge, published in 2008, is the first book I recommend when people are interested in learning more about behavioral finance, even though little of it deals directly with markets, and even though I vehemently disagree with most of it. I recommend it so highly because its underlying insights into human behavior are true and useful. I disagree with its policy implications because I think it's immoral for government to manipulate decisions people make, even if it does so "benevolently." For years, I've assumed readers would discern that distinction themselves.

Buffett-Rule Charity Flops When Put to Test

Originally Published In:

Bloomberg View (2/13/2012)

See link above

Lower the Debt Ceiling: Let the politicians suffer the consequences of ruining America’s credit rating

Originally Published In:

Fairfield County Weekly (2/2/2011), New Haven Advocate (2/2/2011), Hartford Advocate (2/2/2011)

The big faux debate in Washington these days is whether or not the federal debt limit should be raised. Congress needs to pass a new law each time the government reaches its previous limit on how much money it can borrow. Over the past 70 years, they have raised it more than once a year on average.

In other words, the debt limit is not a limit at all. It’s just a formality. It’s as if you set yourself a goal to have a balance of less than $3,000 on your credit card bills. Then, after reaching $3,000, you adjust your goal to $3,500, then $4,000, and so on. You will eventually reach the credit card’s externally imposed limit. But what’s the external limit on America’s debt capacity?

Labor, Math and Love

Originally Published In:

Fairfield County Weekly (1/4/2011)

The federal government has 2 million employees. Across all states, there are 4 million more state government employees and 11 million more local government employees. (Connecticut has 57,117 state government employees and 108,972 local government employees.) That means there is a grand total of 17 million people whose wages are paid by our taxes.

In the meantime, unemployment is now a big problem, largely yet ironically due to the regulations, laws, and management of these 17 million people in grinding our economy to a halt. There are about 9 million people collecting unemployment checks right now, with about half of those from temporary emergency measures and half on more conventional unemployment. There are another 6 million or so who are unemployed but not receiving any money from the government.

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