BU Now » bank bailout

Nations consider bank taxes

Dick Taffe — Thu, 01 Apr 2010 22:22:19 +0000

Germany is moving to adopt a new bank tax to cover the cost of possible future bailouts, and France is considering the same thing. Former Deputy Comptroller of the Currency Robert Bench, now a senior fellow at the BU Law School’s Morin Center for Banking and Financial Law, says perhaps the best way to protect the taxpayer against troubled financial companies is to keep the institutions out of trouble in the first place.

“Rather than tapping financial firms to create a government fund which always will be inadequate, perhaps require financial companies to put away significantly more of their earnings into ‘prudential reserves,’ making the institutions ‘too safe to fail.’”

Contact Robert Bench, 617-353-5428, bobbench@bu.edu

Small banks slow at bailout payack

Dick Taffe — Thu, 18 Mar 2010 20:54:01 +0000

While most of the huge banks which got taxpayer bailouts last year have paid back their TARP loans, hundreds of community banks haven’t. Robert Bench, a former deputy Comptroller of the Currency and now a senior fellow at BU Law’s Morin Center for Banking and Financial Law, says it’s no surprise. Too many real estate development and commercial real estate loans and inability to raise capital, he says.

“The ‘Volcker Rule’ seeks to redirect the largest banks back to serving the broader financial needs of America. Perhaps we also need new rules for more diversification of loan portfolios at community financial institutions.”

Contact Robert Bench, 617-353-5428, bobbench@bu.edu

Examiner: Lehman croaked Lehman

Dick Taffe — Fri, 12 Mar 2010 20:18:43 +0000

The federal bankruptcy examiner’s report on the collapse of Lehman Brothers shows the 158-year-old firm died from multiple causes, including bad mortgage holdings and accounting gimmicks used to hide its mounting debt. Law Professor Tamar Frankel, author of “Trust and Honesty: America’s Business Culture at a Crossroad,” says if Lehman scammed stockholders and investors, they should pay.

“Corruption starts at the top and spreads downwards. The results of corrupt leadership should be years in prison and payment of the entire salaries and bonuses since the fraud started.”

Contact Tamar Frankel, 617-353-3773, tfrankel@bu.edu

TARP $$ for small-biz lending

Dick Taffe — Tue, 02 Feb 2010 21:25:06 +0000

President Obama has proposed using $30 billion from the TARP bank bailout program to create a small-business lending fund to spur job growth. Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law, said he has been suggesting such a fund but that bankers may be skeptical that it may come with crippling red tape.

“If the Treasury were given a ‘do over’ on the original TARP program, it would look something like President Obama’s new small business lending fund.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

“Stress Tests” Done, Now What?

Dick Taffe — Mon, 11 May 2009 14:09:59 +0000

With the government’s “stress tests” now completed on the nation’s largest banks, School of Management risk expert Mark T. Williams, a former Federal Reserve bank examiner, looks at the lessons learned and what happens next. “Stronger capital requirements, better regulatory risk oversight, and banks with a stronger handle on fundamental risk-management principles should help reduce the chance of another banking meltdown,” he says in a Reuters commentary.

Contact Mark T. Williams, 617-358-2789, williams@bu.edu

Small investors may be allowed in on bank bailout

Dick Taffe — Thu, 09 Apr 2009 21:01:59 +0000

School of Management Professor Scott Stewart, an investment-management expert and former Fidelity funds manager, says the possibility of small investors being allowed to get in with the big hedge funds in investing in the banking bailout might be a disaster, but could work.

“To provide access to the little guy, you’d want a mutual fund or exchange-traded fund (ETF) format. This requires providing liquidity. Another approach would be offering a new closed-end fund, which doesn’t provide daily liquidity, or an ETF, which traditionally offers in-kind liquidity but couldn’t in this case.

“But with a mutual fund, even if half are in liquid investments, there’s the risk that many people will want out, but can’t get out. This is typically associated with a significant drop in value. And this could be a public relations disaster in the making.”

Contact Scott Stewart, 617-353-2353, sstewart@bu.edu