Deep T.

17

Megabank dodges a bullet

For Mega Bank (the big four mortgage banks) to not enter a deleveraging phase, it must continue to raise funds in offshore markets. Domestic sources of funds will not meet the demand even as the commonwealth government raises funds offshore and pumps those funds into the economy and Mega Bank. Having caused pain last year,

10

Too big to fail. Act 3

Find below “Act 3: Caught in a bond”, the third and final installment of Deep T’s new play “Too big to fail”. Acts 1 and 2 are below. Enjoy (in a black sort of way!). Too big to fail Act 2: Crunching capital Too big to fail Act 1: Thanks for coming

8

Too big to fail. Act 2

Find below “Act 2: Crunching capital”, the second installment of Deep T’s new play “Too big to fail”. Acts 1 is below and Act 3 will be published tomorrow. Enjoy (in a black sort of way!). Too big to fail Act 1: Thanks for coming

13

Too big to fail – the play

Find below “Act 1: Thanks for coming”, the first installment of Deep T’s new play “Too big to fail”. Acts 2 and 3 will be published tomorrow and Thursday. Enjoy (in a black sort of way!).

20

Unintended consequences of covered bonds

Recently Australia passed legislation so that Australian ADI’s can issue covered bonds and last week APRA released a paper and APS 121 Guidelines on how APRA is going to regulate the issuance and management of covered bonds. But the legislation and the regulator have created an infrastructure which may have serious consequences for Australia’s banking system. The

5

Bad regulation

MB has hosted many debates around cultural differences between countries and groups of people. But I’ve never understood what the writers are referring to when they use the term cultural to explain economic differences between, say, countries. As research certainly supports the notion that with a given set of choices generally we act alike. In

26

The Platypus blues

I’ve been smitten with the Platypus Blues by Ms Luci Ellis, the erstwhile RBA Head of the Financial Stability Department. Her speech last week has received commentary on MB from H&H and Rumplestatskin but I think it needs some special detailed attention due to the extraordinary opinions expressed and how its left me feeling. Critiquing

108

It’s the capital, stupid

The problems are simple and the solutions are simple, so why is it so difficult for many to see this and act accordingly? I’m a practitioner, not an economist but I know what I know very well. So does, it appears, all the contributors to MB who are practitioners or economic practitioners, which is certainly

11

G20 warns banks to do more

Peering into the Peers The G20 Financial Stability Board’s “Peer Review of Australia” is a curious critique of Australia’s financial regulators and the follow up to the IMF-World Bank Financial Sector Assessment Program which Australia underwent in 2006. I am very dubious about the FSAP since its April 2007 global report declared that there was

20

Accounting for the rentier

My post last week on APRA’s Discussion Paper on the new Basel III Capital requirements, created a few ripples around what APRA did not address in the discussion paper. Perhaps I can turn these ripples into waves by providing more detail on why APRA’s failure to address these issues will eventually lead to systemic failure

9

APRA continues Invisopower!

APRA’s Discussion Paper on Implementing Basel III Capital Reforms makes for interesting reading mostly for what it does not address rather than the few important reforms that it does. APRA has certainly made an attempt to put enough strength into our banking system to withstand the inevitable crisis to come, but whilst tougher capital requirements will have

29

APRA must reach for the lash

This morning the Unconventional Economist posted an excellent article which points out that both credit rating agencies and our ADI regulator, APRA, are concerned about Australian banks’ lending practices for residential mortgages. In short, in the banks’ drive for both mortgage market share and to keep the credit machine churning there is concern that banks

46

Killing the politico-housing complex

Over the last 25 years Australia and the rest of the world has witnessed the rise of the TBTF financial institution accompanied by the greatest misallocation of resources in the period since the industrial revolution. These institutions and the people employed by them have ensured that all but the rich in both the western and

36

No taxes, cheap houses

Following my recent post, Blame your leaders, in which I explained why high house prices are partly the result of high property taxes I was asked by a voice of sanity in my household: “How can you keep a straight face and propose that one of the demand driven causes of driving up house prices, is

36

Blame your leaders

How about we become solution focused? Maybe even think a little outside the paradigm. MacroBusiness has been full of very well researched articles over the last month with data to burn. Accompanied by more often than not, very well thought through commentary and interpretations. It’s been hard to keep on top of the many topics

42

Moody’s is serious

I wasn’t at my desk when I heard the news that Moody’s had downgraded Australia’s major banks. At the time I didn’t feel the need to look too deeply as I was feeling a little smug. I have been posting for quite some time that these banks are undercapitalized and therefore, by extension, over rated.

18

The bubble formula

What is it that determines house prices? Supply & demand, availability of credit, government subsidies, taxes, or a level of value in the buyers head?  I think it’s time we try to put a little discipline into the debate. Clearly many things go into determining house prices but with a little thought we can perhaps understand

72

Abolish the RBA

There is absolutely no evidence or even studies to produce evidence that the RBA provides any value to the Australian people. Anything the RBA does could be undertaken by the private banking sector. In fact the RBA can only perform three types of tasks. Tasks that the private sector would or are undertaking given the

34

Plunge protection has begun

House prices down! Property market correcting! FHBs Revolt! It’s all happening folks and to many the inevitable asset price correction will gather full speed from here. But be warned and not deluded, the vest powers in every quarter will fight tooth and nail to try and prevent it happening. I had planned to write this

5

More dodgy disclosure

My previous post, Deep T’s (In) Stability Review, provoked some critical responses on the calculation of a bank’s capital. The record needs to be put straight, as these responses were wrong. As a world-renowned biologist and prominent atheist once said, “Never underestimate the ignorance of your critics”. So it’s back to school on Banks’ Capital 101,

52

Deep T.’s Financial (In)stability Review

There have been some very interesting debates on this blog in the last few weeks, which were enlightening. But is the debate somewhat misguided as to what’s truly the most relevant issue around house prices. For my part the systemic risk in the banking system is the main game. House price bubbles are merely a