• Heritage Action
  • More
  • Commentary posted April 22, 2015 by Norbert J. Michel, Ph.D. Status Quo On Housing Finance Keeps Failed System In Place

    The status quo. It’s a powerful force in Washington, D.C. No matter how destructive or inefficient an existing program, institution or system may be, it’s always safer for politicians to maintain the status quo rather than meaningfully change direction. Exhibit A: federal housing finance policy. Prior to the 2008 financial crisis, the federal government spent decades…

  • Commentary posted April 7, 2015 by Norbert J. Michel, Ph.D. Risks From Fed's Interest On Reserves Threaten More Than Monetary Policy

    The Federal Reserve started paying interest on reserves (IOR) in October 2008. Many now suggest this policy has blunted the effectiveness of its expansionary monetary policies. One possibility is that IOR has helped keep all the excess reserves the Fed created in check. That is, because banks receive interest on these excess reserves, they’re not using them to create new…

  • Commentary posted March 25, 2015 by Norbert J. Michel, Ph.D. Congress Should Not Treat Financial Companies As Public Utilities

    Last week a group of eight U.S. Senators sent a letter to Federal Housing Finance Agency (FHFA) Director Mel Watt regarding concerns over what’s known as the Common Securitization Platform. This “platform” is meant to standardize the process of issuing mortgage-backed securities (MBS) in the U.S., and the FHFA has been working on it for more than two years. The FHFA is…

  • Backgrounder posted March 20, 2015 by Norbert J. Michel, Ph.D. Financial Market Utilities: One More Dangerous Concept in Dodd–Frank

    An underreported problem with the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act is that it broadens the concept of what constitutes a public utility. In particular, Title VIII of Dodd–Frank confers a special status on firms that it identifies as financial market utilities (FMUs).[1] This change marks a dangerous shift in the relationship between…

  • Commentary posted March 11, 2015 by Norbert J. Michel, Ph.D. Has Bitcoin's Time Come? The Market--Not Public Policy--Should Decide

    Victor Hugo, author of The Hunchback of Notre Dame, famously said “All the forces in the world are not so powerful as an idea whose time has come.” Perhaps Bitcoin is just such an idea? Digital currencies are still rather new, so it’s hard to know for sure. But for all of their faults, they do seem to be catching on. In less than eight years we’ve gone from zero to…

  • Backgrounder posted February 11, 2015 by Norbert J. Michel, Ph.D. Why Congress Should Institute Rules-Based Monetary Policy

    Many economists take for granted that the Federal Reserve has contributed positively to economic stabilization in the U.S., but its track record warrants a critical appraisal. Since the creation of the Federal Reserve in 1913 the U.S. has experienced the Great Depression in the 1930s, severe inflation and unemployment during the 1970s, a major banking crisis in the 1980s,…

  • Commentary posted January 28, 2015 by Norbert J. Michel, Ph.D. Government Policies Caused The Financial Crisis And Made the Recession Worse

    In his State of the Union address last week, President Obama argued we need government polices to build “the most competitive economy anywhere.”  He’s wrong.  We need the government to leave the private sector alone so that it can build the most competitive economy anywhere. The President and his supporters don’t want to admit it, but the anemic recovery they’re happily…

  • Commentary posted January 13, 2015 by Norbert J. Michel, Ph.D. New Congress, New Opportunities

    Today I’ll be taking part in Heritage Action for America’s 2015 Policy Summit. This event, titled “Opportunity for All, Favoritism to None,” highlights key opportunities for the new Congress to roll-back the reach of government into our lives. The summit covers issues that range from financial market and energy regulations to healthcare and education reform. The best…

  • Commentary posted December 23, 2014 by Norbert J. Michel, Ph.D. CRomnibus Swaps Rhetoric For Reality

    Thanks to one tiny provision stuffed into the CRomnibus spending bill, millions are now familiar with the financial term swap. This provision essentially undoes a Dodd-Frank rule known as the swaps push out rule. That Dodd-Frank regulation – one of several which still had not been fully implemented – forced banks to choose between getting rid of their swaps business or…

  • Commentary posted December 11, 2014 by Norbert J. Michel, Ph.D. Ease up on Easing?

    Two reasons the Federal Reserve should stop trying to stimulate the economy: The policies it has enacted so far have contributed very little to the economic recovery. It has likely already reached the limits of what monetary policy can do to boost the economy. The Fed's quantitative easing programs have filled the banking system with excess reserves. The federal funds…

  • Commentary posted December 9, 2014 by Norbert J. Michel, Ph.D. Jim Grant, Recession and Recovery in 1921

    James Grant’s excellent new book, The Forgotten Depression: 1921: The Crash That Cured Itself, tells the story of “America’s last governmentally untreated depression.” Just prior to the Roaring Twenties, the U.S. went into a deep economic slump but soon recovered—despite no active government stimulus policies. That sort of government inaction, of course, is very…

  • Testimony posted December 3, 2014 by Norbert J. Michel, Ph.D. Improving Financial Institution Supervision Ending the Federal Reserves Regulatory Role

    Testimony before Committee on Banking, Housing and Urban Affairs, Financial Institutions and Consumer Protection Subcommittee United States Senate November 21, 2014 Norbert J. Michel, PhD Research Fellow in Financial Regulations The Heritage Foundation A critical lesson from the Fed’s first 100 years is that an overly broad interpretation of the Fed’s role in…

  • Commentary posted November 25, 2014 by Norbert J. Michel, Ph.D. Should 'Legal But Shady' Be A New Regulatory Standard?

    Last Friday I had the pleasure of testifying at a Senate hearing. The topic was “Improving Financial Institution Supervision: Examining and Addressing Regulatory Capture.” “Regulatory capture” refers to a common phenomenon: individuals serving as regulators come to identify with the firms they regulate at least as much as with the agencies that employ them.  Thus, the…

  • Commentary posted November 12, 2014 by Norbert J. Michel, Ph.D. Repeal Dodd-Frank and End Too Big To Fail

    The Republicans will hold a comfortable majority in the U.S. House and, at most, a 55 seat majority in the Senate for the 114th Congress. That’s not a wide enough margin to override a Presidential veto. Still, the Republicans owe it to their constituents to exercise governance. On election night Sen. Mitch McConnell (R-KY) indicated Republicans will, in fact, try to do…

  • Backgrounder posted November 3, 2014 by Norbert J. Michel, Ph.D. Repealing Dodd–Frank and Ending “Too Big to Fail”

    The financial crisis of 2008 led to the “Great Recession” from which the nation is still recovering. Despite the slow economic rebound, and in the face of contradictory historical evidence, many critics are still trying to blame these events on the supposed failure of the free market. They claim that a lack of regulation caused the crisis and that the federal response…