Each weekday, we'll be scouring the financial blogosphere for the best bits of wisdom from financial insiders, analysts and economists. Check back every weekday for the latest take on the economy from the web's most astute observers.
Fear-Mongering On The Cost Of Financial Reform. A recent JPMorgan report put the cost of financial reform for the world's top banks at $220 billion annually, a figure that's pure "self-interest fear-mongering,' writes James Kwak. The report, for one, estimates that if every proposed financial reform is enacted, banks' prices on all products would have to rise 33 percent.
Kwak points to a recent HuffPost blog post by Jason Paez, and writes that this estimate assumes a lot. Here's Kwak: "[As] Paez points out... the 33 percent threat assumes an oligopoly that is able to pass on all costs to customers. There is no magic law of economics that says that industries naturally return to some exogenously determined level of profits...And there is no law that says that banks' 2007 profit levels are the ones that they are magically entitled to."
Paulson's Revisionism. As Henry Paulson continues to make the media rounds for his book "On The Brink," at Seeking Alpha, Christopher Pavese says he's not surprised that Paulson opposes Obama's key regulatory reforms. This is the man, Pavese says, who spearheaded "appalling" attempts to shrink capital requirements at investment banks in 2004. But what's worse, he says, is that "our current Treasury Secretary has not exactly been an obvious improvement thus far":
"We'll acknowledge that the joint blunders of Bernanke and Geithner have managed to avoid Financial Armageddon. But our praise stops there. We've done nothing to correct the previous structural imbalances. Consumer deleveraging has just begun. Unemployment will remain high and sticky for years. Small business continues to struggle. And the only thing we can see that is experiencing a v-shaped recovery is bank profits and the bonuses of Paulson's old cronies."
The Recession's Over, Long Live The Recession: On his blog, The Big Picture, Barry Ritholtz throws some much-needed water on the Fed's declaration that the recession may be over. Using data from Tableau Software he has some elegant graphs on industrial production by sector, which highlight some lagging industries. The takeaway: the adage "a rising tide lifts all boats" doesn't apply to this recovery.
Hedge Funds Have Record Short Bets Against The Euro. A truly scary bit of news from Market Folly.
One Start-Up Could Make A Killing In Mortgage Insurance. At The Atlantic Business blog, Daniel Indiviglio considers whether the market is ripe for a new mortgage insurer. The Essent Group has reportedly raised $500 million and, at this point, has few competitors. The mortgage crash, Indiviglio writes, not only resulted in tighter lending standards -- which are likely to limit losses -- but also made it reasonable for insurers to demand higher premiums. Whether Essent could survive another housing crisis is less clear, Indiviglio says, but in any case the next housing crisis is "at least several decades off."