Fragile by design
by Charles W. Calomiris · first published 2014
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2014–2017first – last mentioned
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"Why are banking systems unstable in so many countries--but not in others? The United States has had twelve systemic banking crises since 1840, while Canada has had none. The banking systems of Mexico and Brazil have not only been crisis prone but have provided miniscule amounts of credit to business enterprises and households. Analyzing the political and banking history of the United Kingdom, the United States, Canada, Mexico, and Brazil through several centuries, Fragile by Design demonstrates that chronic banking crises and scarce credit are not accidents due to unforeseen circumstances. Ra
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‘Fragile by Design: The Political Origins of Banking Crises and Scarce Credit’, by Charles Calomiris and Stephen Haber. Quoting http://press.princeton.edu/titles/10177.html : > Why are banking systems unstable in so many countries—but not in others? The United States has had twelve…
on “Tulipmania: More Boring Than You Thought” ↗So we can't but Canada can? As straining-of-credulity as such a bumper-sticker is, isn't that the logical conclusion? Very Serious People ( with whom I happen to agree) actually say such things in "Fragile By Design". Calomiris/Haber are good writers and good thinkers. They do not call out medical nor political leadership there, but it's not exactly a stretch. It's a short drop from this to the view of America from…
on “Why doctors are sick of their profession” ↗…to say, banks. With banks, the incentives to build a robust and stable system are lacking; one need only compare and contrast with Canada. Charles Calomiris and Stephen Harber do this very thing in "Fragile By Design". If all regulation worked this well, we'd all be better off. It is critical that we know why regulation that doesn't work, doesn't.
on “How the US stopped its fisheries from collapsing” ↗…inspired expansion away from the 20% down, 30 year mortgage to what ended in 2008 was an effort to tie people down to a mortgage for reasons of, roughly, social control. If you read Haber & Calomiris "Fragile By Design" - they're quite conservative - you get a better picture of it. I love the suburbs. Because if I play my cards right, I get to be a beneficiary to much of all that.
on “Why suburbia sucks” ↗…Morgan, who forced the network of haircuts and liquidity support needed to end that. It's not clear to me that the accusations of moral hazard hold that much water. Calomiris and Haber wrote the excellent "Fragile by Design", which examines the difference between the Canadian and US financial systems. I'm far from an expert, but this seems the most fruitful examination so far - everybody was operating on towers of just-so…
on “The Return of the Utopians” ↗…really big enterprise cut no ice with the various Congresscritters. FWIW, I am not a "break up the banks" guy[1] mainly because of things written and said in podcasts by Charles Calomiris, author of "Fragile By Design" along with Stephen H. Haber. It is all more nuanced and complicated than that, and the small bank lobby in the US really is a thing and a thing that has caused problems. [1] Canada has very close to…
on “Wells Fargo CEO John Stumpf Steps Down” ↗Calomiris and Haber ("Fragile By Design") have run the natural experiment between the U.S. and Canada over the 2008 bubble period. The conclusion is the opposite of yours - Canada really just has the one bank, and sailed right through the…
on “Banks Paid $32.6B in Bonuses Amid U.S. Bailout (2009)” ↗Charles W. Calomiris and Stephen Haber made a similar point in a recent EconTalk interview discussing their book Fragile by Design. When the US government wants to promote a populist cause (college, home ownership, farms), it is easier to do so off balance sheet by reducing interest rates rather than giving a straightforward subsidy.…
on “Student Loans Are A Drag On The Economy” ↗In "Fragile By Design", Charles Calomiris and S.H. Haber basically compare/contrast Canada and the US and it seems that in Canada, "social spending" is an explicit government function where in the U.S., it's swept under the…
on “The IPO is dying – Marc Andreessen explains why” ↗…banks actually had access to any specie. I can never say I am sure what Mr. Rothbard is on about. The very public justification given for bailouts is that there was systemic risk. Calomiris/Haber wrote "Fragile By Design" in which the U.S. and Canada are compared/contrasted ( as close to a natural experiment as you can get ) and they essentially find rather deep cultural reasons for this. The "why" of the mortgage crisis…
on “The $9B Witness: JPMorgan Chase's Worst Nightmare” ↗