Razib points to a paper that supports my hormone-based approach to regulating financial risk.

Rocco Huang and Lev Ratnovski say that Canadian banks did relatively well because they relied more on deposits. To me, this says that securitization is not as wonderful as the American financial community makes it out to be. Pointer from the indispensable one.

The Financial Times reports,

The US government, by contrast, is sitting on a paper profit of almost $11bn on its 34 per cent shareholding in Citigroup…

The government said it had earned an annualised return of 23 per cent from its $10bn investment in Goldman Sachs under Tarp. In June, Goldman returned the $10bn and later paid another $1.1bn to buy back warrants attached to Tarp aid. Morgan Stanley, American Express and other banks have done the same, leaving taxpayers with substantial profits.

Pointer from Tyler Cowen, who says we should admit that the bailouts were a good idea.

Certainly, profits on the transactions would meet my test of whether the measures were addressing a liquidity crisis or just bailing out insolvent institutions. If AIG, Freddie, Fannie, and FHA all emerge solvent from this, then I absolutely have to shift my position in favor of the “insider” view that this was mostly a liquidity panic. I would probably be willing to make that concession even if AIG, Freddie, Fannie, and FHA together have negative net worth, as long as the deficit is under $100 billion for the four of them.