Risk-weighting of MBS and sovereign debt under financial regulations

On Saturday, Peter Wallison of the American Enterprise Institute wrote an op-ed in the Wall Street Journal about regulators’ role in the financial crisis of 2008 and the present sovereign debt crisis. I certainly don’t agree with everything that he said, but he makes a very good point about assets that are deemed to be low-risk or risk-free under Basel or other frameworks:

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Two policies using immigration to boost investment

Can foreigners be lured by favorable VISA treatment into creating new jobs and bolstering home prices in the U.S.?

Yesterday’s Boston Globe had an interesting article about a program designed to increase business investment in the United States.

The immigrant investor program, created in 1990 by Congress to compete with a similar initiative in Canada, helps foreigners slash through the red tape in the US immigration system while allowing businesses … to raise the money they need to expand.

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A New Model for Corporate Boards [Wall Street Journal]

In 2002, Congress passed the Sarbanes-Oxley Act to prevent corporate governance debacles like Enron and WorldCom from happening again. But six years later, many of the largest U.S. institutions had to be rescued by massive federal assistance. All of these institutions were Sarbox-compliant: Most members of their boards were independent, and their auditors’ reports showed no material weaknesses in internal controls. So why were the reforms so ineffective?

The Perils of Chasing Higher Yields [Wall Street Journal]

By KAREN BLUMENTHAL.
Bob Pozen, chairman of MFS Investment Management in Boston and author of a new book, “Too Big to Save?”, argues that increasing the insured amount to such a high level discourages companies and wealthy individuals from studying which banks are worthy of holding their money.

That essentially removes one of the private-sector checks in the system, he says.

Individuals who chase the higher yields offered by weaker banks could be taking an unforeseen risk. If the bank fails and is acquired by another bank, the principal invested will be protected, but the acquiring bank can cut the interest rate offered to market rates, the FDIC says.