June 23, 2021

It’s the Economy: Did We Waste a Financial Crisis?

Remarkably, five years after the crisis, the health of the financial industry is just as hard to determine. A major bank or financial institution could meet every single regulatory requirement yet still be at risk of collapse, and few of us would even know it. Despite endless calls for change, many of the economists I’ve spoken with have lamented that the reports that banks issue about their finances remain all but useless. The sprawling Dodd-Frank Act, which rewrote banking regulation in 2010, didn’t resolve things so much as inaugurate a process of endless rules-writing by regulators. Meanwhile, the European Union is in the early stages of figuring out how it will change the way it regulates banks; and the gargantuan issue of coordinating regulations across borders has only barely begun. All of these regulatory decisions are complicated, in part, by a vast army of financial-industry lobbyists that overwhelms the relatively few consumer advocates.

Economists have also been locked in their own long-running arguments about how to make the banking industry safer. These disagreements, which are generally split between the left and the right, can have the certainty and anger of religious wars: the right accuses the left of hobbling banks and undermining prosperity; the left counters that the relatively lax regulation advocated by the right will lead to a corrupt oligarchy. But there actually is consensus on one of the most important issues. Paul Schultz, director of the Center for the Study of Financial Regulation at the University of Notre Dame, led a project that brought together scholars of financial regulation from the left, the right and the center to figure out what caused the financial crisis and how to prevent a sequel. They couldn’t agree on anything, he told me. But a great majority favored higher equity requirements, which is bankerspeak for the notion that banks shouldn’t be allowed to borrow so much.

I conducted my own Schultz test by talking to Anat Admati and Charles Calomiris, prominent finance professors at Stanford and Columbia, respectively, who roughly define the opposite ends of the argument over bank regulation. Admati is a Democrat, Calomiris a Republican. In her recent book, “The Bankers’ New Clothes,” for example, Admati has argued that bankers misrepresent their finances. Calomiris, who used to be a banker, is generally seen as friendly to the field. As I spoke to them both, they also disagreed on everything until the conversation turned to borrowing. At which point, they independently explained that banks borrow too much, that the government rules are too confusing and that the public has been misled.

I asked Admati and Calomiris to explain their problem with the current system. I randomly chose Citigroup’s most recent annual S.E.C. report, a 300-page tome filled with complex legal jargon outlining the bank’s performance. The key number that we looked for was the capital-adequacy ratio, which is a measure of how much capital you need to back up the risk of your assets. This is supposed to be the one number that makes clear whether a bank is prepared for a crisis. A high ratio means the bank’s owners could bear most losses without requiring a bailout. A low number means the opposite.

It was extremely hard, though, to know how Citi was faring. Calomiris pointed out that the bank reports several different measures, ranging from what appears to be a safe capital ratio of 17.26 percent (implying the bank maintains a loss-absorbing buffer of $17 for every $100 of the assets it owns) to a potentially worrisome 7.48 percent (with stops at 14.06, 12.67 and 8.7 percent). When I asked Admati how healthy the bank was, she replied, “It’s hopeless for anyone to know.”

Article source: http://www.nytimes.com/2013/08/11/magazine/financial-crisis.html?partner=rss&emc=rss

Retooled Car Series Revives Summer Box Office Hopes

That is what should have happened to “The Fast and the Furious” car-racing series five years ago when a third installment, “The Fast and the Furious: Tokyo Drift,” sputtered, selling about $62 million in tickets in North America, or 50 percent less than its predecessor.

But Universal Pictures didn’t give up, and a souped-up fourth movie, “Fast Furious,” showed surprising strength in 2009.

Over the weekend, a new entry, “Fast Five,” rocked Hollywood by selling almost $84 million in tickets, by far the biggest opening of the year and — if the prayers of movie moguls are answered — signaling the beginning of a box-office turnaround.

“Relieved” is one word Adam Fogelson, Universal’s chairman, used to describe his state of mind on Sunday morning. “We made a lot of very specific and very strategic choices that were not obvious.”

Studios and theater owners urgently need a big summer. Domestic box-office revenue has fallen 14 percent in 2011, to about $3 billion, compared with the same period a year earlier, according to Hollywood.com, which compiles statistics on ticket sales. Higher prices, particularly for 3-D screenings, have probably kept some people at home. But the likeliest culprit is quality, which many studio executives concede has been lacking in a lot of releases.

The movie industry’s high-stakes summer season traditionally stretches from the first full weekend in May to Labor Day, when studios record about 40 percent of their annual box office revenue. With “Fast Five,” Universal decided to stretch the period, using the marketing slogan “summer starts early.” Ticket sales easily surpassed the record for the weekend, set last year by “A Nightmare on Elm Street,” which took in $33 million.

“Fast Five” is an unusual sequel because of Universal’s fix-on-the-fly approach, but it is as good a marker as any of what the movie capital is counting on in the months ahead: sequels and more sequels. There are 10 this time around, including “Fast Five,” more than there have been in any summer in recent memory.

“They’re stacked one after another after another, which will help give the marketplace momentum,” said Phil Contrino, editor of BoxOffice.com.

Of these films, one in particular is expected to be a multiplex monster — “Harry Potter and the Deathly Hallows: Part 2” from Warner Brothers. It is the first Potter film to be released in 3-D and finishes out the series.

Expectations are also high for “Pirates of the Caribbean: On Stranger Tides” (Walt Disney Studios), “Kung Fu Panda 2” (DreamWorks Animation) and “Transformers: Dark of the Moon” (Paramount Pictures).

Pixar’s “Cars 2” doesn’t open until June 24 but has already broken one record: the biggest array of related retail merchandise, beating “Star Wars.”

Hollywood is taking some enormous risks in the coming stretch. One of the biggest gambles is “Green Lantern,” a space opera that Warner hopes will put to rest criticisms about the degree to which it has mined its DC Comics library for movie characters. Early buzz has been mixed, with questions about the visual effects and the skin-tight costume and mask worn by its star, Ryan Reynolds.

“There is also the worry of superhero fatigue,” Mr. Contrino said, noting that “Green Lantern” will arrive after Marvel’s “Thor” and 20th Century Fox’s much-anticipated “X-Men: First Class.”

Another question mark is “Cowboys Aliens,” an expensive genre mash-up starring an aging Harrison Ford. It’s an alien movie set in the Old West, and some industry experts fear it could fall flat. On the positive side, the companies behind this picture, DreamWorks Studios and Universal, recently released new marketing materials to positive response.

Nobody needs hits more than Universal, which, despite a few bright spots like “Hop,” was recently labeled “a bomb factory” by the entertainment news site Deadline.com. The studio has a new corporate parent, Comcast, which is watching to determine whether management changes are needed.

“The Fast and the Furious” franchise, which made its debut in 2001 as a counterculture car movie, underscores how hard Universal executives are trying.

Article source: http://feeds.nytimes.com/click.phdo?i=42536f821c1ac4b9627cdc60ae00e5e1