Forbearance: An empirical analysis

Several recent articles have analyzed conditions under which allowing capital-deficient banks to continue to operate may be optimal policy. This article examines the performance of banks admitted into the FDIC's Capital Forbearance Program between 1986 and 1989 and finds that, for the majority of these banks, there was no substantial improvement in their capital ratios. We use a logit regression analysis to attempt to identify those banks whose financial condition improved with forbearance and find that banks which did improve are not clearly identifiable from pre-forbearance financial data. Instead, the banks which improved did so due to infusions of new capital, extraordinary income, and improvements in the local economies, factors which are not easily identifiable ex ante by regulators. The conclusion is that, while some grants of forbearance may result in large saving to the FDIC, in the majority of cases granting forbearance to troubled banks is unlikely to reduce the expected loss to the deposit insurer.University of HoustonUniversity of HoustonCooperative Bank of Taiwan, Taipei, Taiwan     

Dealing with demand forecasting games in transport privatization

Privatization has increased the number of players in the decision-making process for major transport investment decisions. The main argument of this paper is that this fragmentation is creating opportunities for strategic decision-making by each actor and that this is particularly obvious in the context of demand forecasting. This paper explores some of the specific causes and consequences of this new situation, including the perverse incentives, linked to the diversity of the objectives across the actors and to the risk allocation induced by the regulatory regime. It illustrates the issues and possible solutions from a wide range of modal and country experiences. In particular, it discusses the role of the newly independent sector regulators in reconciling these diverse goals and their limitations in view of the major information asymmetries problems they face.     

Paternalistic Capitalism

Brazil’s political-economic structure has rapidly evolved over the past decade, shedding its shallow policy alignment with neoliberalism of the 1990s. Brazil’s large, diversified industrial base was painfully constructed over the course of the twentieth century. A major and sustained political realignment, which began in 2003, has resulted in two essential thrusts in development policy: (i) a “growth with equity” strategy that has dramatically reduced poverty and inequality; and (ii) a state-led “industrial policy” designed to upgrade manufacturing and direct the accumulation process toward specific sectors, highlighting and consolidating the National Innovation System (NIS). Nonetheless, as a result of the commodity boom that swept through Latin America, Brazil’s natural resource sector achieved outsized growth from 2002 to 2012. One result has been a shift toward resource intensive activities and a broad opening to low-cost Chinese manufactures. Utilizing an institutionalist framework and method, this article analyzes the cohesion of the NIS and the emergence of the “deindustrialization” debate. Also, it assesses the instrumental nature of the “growth with equity” strategy. The article hypothesizes the viability of an endogenous “neo-developmentalist” strategy, while acknowledging the emergence of fundamental exogenous forces and structural ceremonial/institutional factors that have impeded the consolidation of a Brazilian social structure of accumulation.     

Over den vermogenstoestand des lands en de noodzakelijkheid van universeele schuld-vermindering

Dit stuk vormt de zakelijke inhoud van een op 24 October jl. tot H. M. de Koningin gericht adres, geschreven in de waarschijnlijk ijdele hoop langs dezen weg de verantwoordelijke instanties te overtuigen van den ernstigen economischen noodtoestand des lands en van den geringen ernst waarmee onze economische politiek geleid wordt; en geschreven met de nevenbedoeling om door publicatie iets bij te dragen tegen de markante onverschilligheid van ons volk voor zijne levensbelangen, die o.a. tot uiting komt in het stelselmatig ontwijken van de groote vraagstukken van onzen tijd en in de cynische wijze waarop het van deskundige zijde komend waarschuwend oordeel genegeerd wordt. De oorsprong bepaalt vorm en toon van het stuk. Het is een herhaald, op economische gronden steunend pleidooi voor eene principieel nieuwe economische politiek en voor een bepaalden ver-strekkenden nood-maatregel in 't bijzonder. Ware het enkel eene kritiek geweest op het economisch wan-beleid der laatste jaren, dan zou de toon waarschijnlijk anders en wat scherper zijn uitgevallen. Ware het eene theoretische verhandeling geweest over de besproken economische vraagstukken, ook dan ware de opzet eene geheel andere geweest. Nu is de inhoud van het stuk nog eens doorgewerkt aan de hand van mij van deskundige zijde geworden opmerkingen. Ten einde de leesbaarheid niet te schaden en den oorspronkelijken vorm te behouden zijn in den tekst slechts enkele uitdrukkingen, die tot misverstand aanleiding konden geven, gewijzigd. Een aantal punten, die in den tekst of niet voldoende duidelijk of voor betwisting vatbaar zijn, zijn in voetnooten toegelicht of verdedigd. Enkele beschouwingen over besproken vraagstukken, die zich wat meer zelfstandig naast den tekst bewegen, zijn als aanteekeningen aan het slot toegevoegd.     

Postwar monetary policy

Summary Monetary policy has played an active role in Dutch postwar economic policy. Essentially, it has sought to contribute to balanced economic growth by controlling the money supplyM ₂ in relation to national income. Policy measures extend to all sources of money creation-viz. bank credit, public sector finance and the balance of payments - and are predominantly of the quantitative type. This is reflected, among other things, in medium-term targets for the structure and outcome of the balance of payments and the size and coverage of the public sector's borrowing requirement. Internationally, the Netherlands favour and participate in stable exchange rate systems. This has not led to serious conflicts with domestic monetary objectives until the seventies, when excessive easing of monetary conditions had to be accepted temporarily.