A lot of these pointers come from Mark Thoma. Problems in the UK, Uncertainty caused by regulators, another breathless WaPo expose of deregulation.1. A scary quote from The Times

Like Iceland, we boast a huge banking industry out of all proportion to the overall economy. Like Iceland, we have an unfunded depositor lifeboat scheme totally unequipped to grapple with failing banks. Like Iceland, our national output is dwarfed by the vast liabilities of our banks. Like Iceland, our banks for years scoffed at relying on domestic depositors to fund their activities and developed a dangerous addiction to wholesale money. Like Iceland, our Government is poised to go on a borrowing spree to try to soften the pain.

It happens to be the Times of London, not New York, but if it were the latter it would be difficult to argue.

2. John Hempton writes,

if you accept that the problem is that people will no longer lend to financial institutions then the core thing that is required is the perception that the US Government will not arbitrarily confiscate your rights if you lend to financial institutions.

He is attacking FDIC chair Sheila Bair for closing banks and wiping out bondholders, even though the banks might be solvent.

I would add that when pundits and politicians start talking about the need to force companies to suspend dividends in order to get bailouts, the impact of that is going to be to increase the need for bailouts. One of the few comforting things about stocks these days is that the dividend yield is fairly high. But in a world where government may decide you need a bailout (remember when Paulson pulled banks into a room and told them that they had to take government capital, whether they needed it or not?), the dividend yield is less of a comfort. So the stock price falls, and the need for a bailout increases.

3. Tanta comments on the latest Washington Post tale of deregulatory excess, in this case at the Office of Thrift Supervision (OTS).

Back in 2005 I posted frequently on the progress of the proposed new guidance. I spoke with a number of regulators in 2005 and 2006 who were involved in the process, and a number of them expressed frustration with the OTS and the Fed.

When you read the Post story, keep some things in mind. First, a lot of Washington insiders are maneuvering to buff their reputations. Hank Paulson recently went on the interview circuit with sympathetic journalists. Sheila Bair, whose main job is to protect the deposit insurance fund, is posing as the great friend of the distressed homeowner (a species that seems difficult to locate among all the speculators). One of the ways you buff your reputation is to trash someone else’s. A second thing to keep in mind is that mortgage securities were the big issue. It was not just that Countrywide had unsound lending practices–it was the fact that they could sell their junk so readily in the secondary market. A lot of the institutions that wound up holding junk mortgages were banks regulated by the FDIC, not thrifts regulated by OTS. A third thing to keep in mind is that the Post story piles a great deal of breathless rhetoric on very little quantitative data. If one thinks that Freddie Mac and Fannie Mae had little to do with the crisis, because their share of subprime lending was small, then the thrifts profiled in the story are likely to have even less to do with the crisis, because their share was even smaller.