Month: December 2009

Obama Asks US Banks to Lend

I know the parallels are not exact but this story is a reminder that our current banking situation—involving banks that don’t want to lend, governments exhorting them to do so and banks focused heavily on attempting to escape government control—is not exactly unique. Some highlights:

Bank executives say they itch to make profitable loans, as many as possible, but are struggling to find qualified borrowers. They also say that the administration is asking for increased lending even as it pursues financial reforms that will limit the ability of banks to make loans.

And, of course,

“America’s banks received extraordinary assistance from American taxpayers to rebuild their industry,” the president said after the meeting. “And now that they’re back on their feet, we expect an extraordinary commitment from them to help rebuild our economy.

And this:

This is the second time the president has convened bank executives to urge increased lending. The first meeting, in March, did little to slow the slide. The president said Monday that he continues to get “too many letters from small businesses who explain that they are creditworthy and banks that they’ve had a long-term relationship with are still having problems giving them loans.” But the White House on Monday defended the value of the rhetoric.

“I think that the bully pulpit can be a powerful thing,” said press secretary Robert Gibbs.

We’ll see whether asking nicely a second time works well for them.

Honohan Testimony to Oireachtas Committee

Governor Honohan’s opening statement is available here.

Public Policymaking and the Marketplace for Ideas

In a recent speech to a conference on “Transforming Public Services”, I argued that official policy-advice and decision-making processes are overly secretive and cartelised and that increased transparency and contestability would yield superior outcomes.  Good ideas would have a greater chance of driving out bad ones and the possibilities for interest-group and regulatory capture would be reduced. The paper argues for:

– clearer lines of demarcation between expert policy advice and political decision making

– a US-style Council of Economic Advisors, to allow a greater diversity of competing voices and an increased likelihood of resignations if political decisions went grossly against expert advice

– a further loosening of the traditional doctrine of “the corporation sole”, which obfuscates the assignment of responsibility

– a radically reformed and better resourced Oireachtas committee system to enhance oversight of the executive

– a relaxation of the libel laws along the lines of the 1991 Report of the Law Reform Commission (e.g. “that the prosecution should be required to show that the matter was false as well as defamatory”)

– a constitutional rebalancing from rigid protection of the “right to one’s good name” in favour of greater freedom of speech

– extending the powers of the Comptroller and Auditor General to “name and shame”

– mandating the public-sector Top Level Appointments Committee to identify and penalise blame-avoidance motivations

– reconstitution of the Special Group on Public Service Numbers and Expenditure Programmes (“An Bord Snip”) at ten-yearly intervals to check the empire-building instincts of the bureaucracy and reduce agency proliferation, which diffuses blame and helps to avoid difficult decisions.

The full paper is here.

Domestic Demand Doomed Ireland

The Financial Times continues its alliterative series on Ireland by publishing my letter responding to last Friday’s “Debtors in Dublin” editorial.

Ireland and Scottish Independence

I found this story interesting. Clearly, the underlying story is just that Ireland is being used a political stick to beat Mister Salmond with. Beyond that, though, the exchange raises some interesting questions. Why are Scottish opposition politicians so sure that an independent Scotland would pursue policies that would lead it towards fiscal troubles of the Irish variety? How could Mr. Salmond assure them that this wouldn’t occur? Do the Scottish opposition believe that the Republic would be better off economically rejoining the United Kingdom?

And what about the banks? Would those two disastrous banks with the phrase “Scotland” in their names have been defined as Scottish banks to be bailed out by the Scottish taxpayer?  Presumably not but this raises the question of how one defines the fiscal responsibility for banking measures as one negotiates one’s way out of a united country.