Working Papers

Profitable Banks, Unprofitable Politics

I have an op-ed in today’s WSJ arguing that the government and opposition’s attacks on the banks are a pointless diversion. Saul Eslake makes similar arguments in today’s Age. After yesterday’s RBA Board minutes destroyed the politicians’ case against the banks, the best Joe Hockey can come up with is this:

Mr Hockey said the minutes had contemplated the banks going further than the official rise but didn’t contemplate the banks going as far as they did.

UPDATE: I have another op-ed in the Business section of The Australian.


posted on 17 November 2010 by skirchner in Economics, Monetary Policy, Politics

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Where do you stand on government support for Australian RMBS?  Your views seem surprisingly close to David Llewellyn-Smith, which surprises me.

Authorities should allow mortgage securitisation to die, as the market clearly wants it to. If we want more competition, then create new banks and deposit incentives. At least that way we also get more business lending.

Ian Harper concluded yesterday’s treatise by arguing that “A clear signal must be sent that the banks are not he only game in town and that government will support securities markets to a measured extent as well.”

It is astounding that some of our economic leaders want to just do it all again, this time risking the national Budget.

Some more of David Llewellyn-Smith’s posts on the topic:
March of the rent-seekers
Here it comes

Posted by .(JavaScript must be enabled to view this email address)  on  11/19  at  07:33 AM

Doh!  double surprise!  Sure would be nice if you could edit comments.

Posted by .(JavaScript must be enabled to view this email address)  on  11/19  at  07:56 AM

I don’t want it to die, but I don’t want government subsidising that business model on the grounds that it will promote competition. It is actually the opposite of promoting competition.

Harper’s proposal is really a second-best option designed to deal with the fact that the wholesale funding guarantee nearly blew up the RMBS intervention, but it would be a better way of doing things.

Posted by skirchner  on  11/19  at  11:38 AM

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