Former Fed Governor Frederic Mishkin was paid $124,000 in 2006 to write a glowing report on Iceland. He never bothered to disclosed that fact.
Moreover, the title of his report has since been change from “Financial Stability in Iceland” to “Financial Instability in Iceland”. What’s up with that?
Watch Mishkin squirm in this interview.
I picked up that video from WC Varones who writes Incompetent paid shill Frederic Mishkin in his own words
In case you were wondering what kind of corrupt idiots are running our entire financial system.
Here’s his 2005 take on Too Big To Fail: What, Me Worry?
Then there’s his great housing bottom call in April 2007.
Mishkin Dismisses “Too Big To Fail”
The actual target of that first link above is “How Big a Problem is Too Big To Fail?“
What does the evidence tell us about whether the too-big-to-fail is a bigger problem now than in the 1980s? My reading is quite different than Stern and Feldman’s. The evidence does not support a worsening of the too-big-to-fail problem. To the contrary, the evidence seems to support that there has been substantial improvement on this score.
As has been documented in Ennis, and Malek (2005), after FDICIA was enacted, the banking industry in the United States has returned to profitability, with return on assets that are even higher than in the 1970s . Even more telling is the change in the relative profitability of large and small banks.
In the 1983-1991 period, the largest banks had a return on assets which was less than half that of mid-size banks. After 1991, the return on assets has been quite similar for the largest and mid-size banks, with the largest banks having a slightly higher return on assets. This change could just reflect idiosyncratic features of the recent sample period relative to the earlier period, but an alternative explanation is that the passage of FDICIA has limited the too-big-to-fail problem.
Mishkin droned on and on about bank profits and capitalization ratios. He was hopelessly wrong about both. Miskin simply could not see the bubble in housing or the bubble in leverage and credit on the balance sheets of banks that was allegedly creating all that “profit”.
In contrast, I offer this September 30, 2007 flashback: Bank Balance Sheets and Earnings
The above link contains many snips from “Minyan Peter” a former treasurer of a top credit card company and treasurer of one of the largest banks in the Midwest.” Here is one such snip.
As much attention as they will get, in the bigger scheme of things, their [the banks’] net incomes this quarter don’t matter. And they don’t matter because of one simple rule for financial services firms:
The income statement is the past. The balance sheet is the future.
Let me repeat it again. The income statement is the past and the balance sheet is the future, especially now.
At the top of a credit cycle, the income statement for a financial institution shows “the best of times”, but buried in the balance sheet is “the worst of times” to come.
History repeatedly reveals the ability of highly profitable banks to go down in flames. How many of you remember Texas Commerce Bank – AAA at the top, but gone at the bottom of a severe credit cycle?
Anyone with an ounce of common sense should have known the “profit” was a mirage and the leveraged Ponzi scheme would collapse. However, Mishkin did not see this coming, nor could Bernanke, nor anyone else on the Fed.
The only potentially redeeming feature of Mishkin’s “too big to fail” analysis is that he recommended that regulators read the book by Stern and Feldman that he rebutted in his article.
Lack of Common Sense, Lack of Ethics
Mishkin’s Columbia Business School Biography is an impressive read but the man does not have an ounce of common sense.
It seems like you have to be an economic fool to be appointed to the Fed or be on the Fed’s staff. Furthermore, Keynesian and Monetarist clowns certainly have an inside track at university professorships.
Unfortunately, being a economic fool, a Keynesian clown or a monetarist clown is not grounds for dismissal from either the Fed or Academia.
However, unethical actions are (or at least should be) grounds for dismissal. It is simply unconscionable for someone at that level to author an academic “research paper” without admitting they were paid to do so.
Mike “Mish” Shedlock
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