Tuesday, June 9, 2015

Stress Test: Reflections on Financial Crises

#author.Timothy Geithner
checkout local library thru Kindle.

I haven't been reading enough. This is my non-fiction read. I do love these market, policy, monetary, economic, business cycle books!

Let's see what an insider see's and the do's and don'ts.

Now I'm finished!

Fascinating insights into policy making.

Here are my notes from Kindle. Thanks Amazon for keeping them!

We weren’t rich by American standards, but we were very privileged.
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Note: that's how i feel!

My mother is from a New England family dating back to the Mayflower,
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Note: she is White brand.main

His father was a German immigrant who settled in north Philadelphia and ran a small business as a cabinetmaker. My father went to a public high school, mostly African American,
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Note: he is White.brand.marginal

she sent him a Valentine from her dorm room. Nine months later, they were married. And they stayed married.
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Note: father was marginal but still white brand so had access to main.brand unlike all the hard working black youth from the same Philie public school. Black.brand.main is changing.

Somehow, I got elected president of my junior and senior classes; my main memory of that initial experience in leadership was how much I loathed public speaking.
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Note: he doesn't like public speaking, but he is definitely NOT introvert.

My father and several other relatives had gone to Dartmouth, and I initially resisted the idea of going there—partly because I wanted to carve out my own path, partly because I felt guilty about the advantages I had applying as a legacy. I decided those were weak reasons not to go to a good school.
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Note: he had access to White.brand.marginal.right-tail, that part of the brand the actively reinforces the main.brand.

I would join three housemates, all of them women. One of them was Carole Sonnenfeld.
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Note: tradition male.brand. integrating with proximal female.brand. How else to nucleate a long-term, stable relationship except by physical proximity. Is there now a NEW electronic proximity? What good is it without sex?

Carole was pregnant again.
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Note: biology of female.brand but empathy and good listener are not restrict traits of fe.brand. Many ma.brand have this trait. Does nucleation require complementary brand (probably no)? Or is it just required for long-term stability (probably yes).

I put too much of a burden on Carole, and too much of their lives happened without me.
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Note: once nucleated into family.brand fe.or.ma must make sacrifice.

September 2005. We invited their regulators, too, including British and German authorities. Lloyd Blankfein of Goldman Sachs dubbed the group “the Fourteen Families,”
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Note: who are the 14?

How could the Fed justify invoking emergency powers to help a nonbank that wouldn’t even help itself?
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Note: is it similar to Iraq? how can we send in US troops when the Iraq people don't want to fight

Citi didn't expect funding for these off-balance sheet vehicles to dry up, because of the same delusions that made risky securities seem safe to investors and rating agencies.
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Note: no capital example.citi group.

And Carole didn't just have reservations; she was opposed.
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Note: again. sacrifices by fe.brand

They didn’t have better solutions; they just didn't like ours. We were often vulnerable to that kind of attack, because we rarely had good options.
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AIG bonus scandal would take the media frenzy and the public anger to new levels, and I knew it would be another devastating blow to confidence in our crisis response. The next day, I called Ed Liddy, the new CEO of AIG, to say, essentially: What the fuck?
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I got into the habit of walking into crowded meetings in Larry’s office and joking: “Is this a real meeting or a fake meeting?” In other words, are we talking about a policy that requires a decision, or just talking?
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Note: aren't science meeting like this too? Or any open style meeting.

Eventually, Congress will have to make some tough choices about the mortgage market—not just how to reduce the government’s dominant role, but how to balance the trade-off between safety and accessibility.
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CEOs of the troubled institutions that required a majority government stake (Fannie, Freddie, AIG) or a merger with a stronger partner (Bear, WaMu, Countrywide, Merrill, Wachovia) all lost their jobs.
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Note: where are they.CEO now?

the central paradox of financial crises: What feels just and fair is often the opposite of what’s required for a just and fair outcome. It’s why policymakers generally tend to make crises worse, and why the politics of crisis management are always untenable.
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Note: Can brands nucleate crisis group who can manage policy.action? what are the movement.rituals to train in preperation? can the brand.tribe be laterall and not classically hierarchtical.

a sustained rise in private borrowing relative to GDP,
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Note: signs of a developing financial crisis

a sustained rise in uninsured short-term liabilities issued by the financial sector, the kind of money that can quickly run
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Note: signs of a developing financial crisis.

safeguards are the constraints on risk-taking that I’ve described as “shock absorbers,” starting with strict capital requirements that restrict leverage and ensure that institutions can absorb losses in a downturn. Other shock absorbers include liquidity requirements that limit financial institutions’ reliance on runnable short-term financing, deposit insurance and discount window access for depository institutions, margin requirements for derivatives and other financial instruments, and mortgage down-payment requirements that restrict leverage for ordinary borrowers.
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Note: measures to reduce risk.

playbook for monetary and fiscal policy is fairly simple.
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After a major shock that depresses demand and creates a risk of deflation, central bankers should ease monetary policy, aggressively lowering interest rates. Once the overnight rate approaches zero, they should find new ways to stay on the accelerator,
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fiscal side, the government should do as much as it can to reduce taxes and increase spending in order to offset the loss of wealth, the tightening of credit, and the collapse in private demand.
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The composition of fiscal stimulus is important, too, and should ideally combine speed and power. Tax cuts tend to be fast but weak; infrastructure investments tend to be powerful but slow; aid to low-income families is fast as well as powerful.
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financial rescue protocol is more complex. You want to conduct a form of triage that distinguishes between the insolvent and the merely illiquid, between firms that will never be viable and firms that just need protection from being caught in the stampede.
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