The Next Financial Crisis: Virtual Banks

By now, the financial woes of Lehman, Bear Stearns, Washington Mutual, and the many other troubled banks is old news.

But we may need to start preparing for another round of bank failures ... in the virtual world.

If indeed it happens, a character named Ricdic will likely be to blame. Ricdic is part of Eve Online, which I have never heard of, but according to this BBC news report "has about 300,000 players all of whom inhabit the same online universe. The game revolves around trade, mining asteroids, and the efforts of different player-controlled corporations to take control of swathes of virtual space."

"At That Moment, Operation Happy Looked Pretty Grim"

At the end of their latest radio piece on the financial crisis, Alex Blumberg and Adam Davidson make a great point about uncertainty in the nationalization debate: Of course, if [Tim Geithner and the Obama administration] were planning to take over the banking system, they wouldn’t announce it beforehand. They’d probably say exactly what they’re […]

Time for the Government to Stop Subsidizing Shareholders of Insolvent Banks

That is what Andrew Rosenfield argues for in this extremely cogently argued piece, and I agree with him. He makes a number of points about the bailout that I hadn’t heard before. Rosenfield ends the article with the following sage words: The present practice of subsidizing shareholders and debt holders of large insolvent bank holding […]

A Happy Banking Tale, and Faint Praise We Can Live With

Interesting piece here by Washington Post columnist Steven Pearlstein about a relatively small North Carolina bank called Citizens South, which avoided bad loans, has remained profitable, and then applied for and won $20.5 million in TARP bailout funds. Writing on the eve of the testimony by eight gigantic bankers before the House Financial Services Committee, […]

Everything You Need to Know About the Financial Crisis: A Guest Post by Diamond and Kashyap

When the financial crisis was just beginning to appear, I did one of the smartest things I’ve ever done: I asked my colleagues Doug Diamond and Anil Kashyap to explain to me what was happening. What they said was so enlightening that I begged them to write it up for the blog, which they did. […]

Erik Hurst on the Risks of Re-Regulation

Erik Hurst is one of the brightest stars among the “new breed” of macroeconomists. He’s my go-to guy for trying to understand the complicated links between macroeconomics and how we actually live our lives. One of the great joys of being an academic economist is enjoying a vigorous debate over a beer. While Erik and […]

If Not I-Banking, What?

The academic year is freshly underway and the financial markets, led by the investment banks, are in deep distress. Which has me wondering: for those of you pursuing a finance or economics degree or perhaps an M.B.A., how have the events of the past several months altered your future plans? For quite a few years […]

Diamond and Kashyap on the Recent Financial Upheavals

As an economist, I am supposed to have something intelligent to say about the current financial crisis. To be honest, however, I haven’t got the foggiest idea what this all means. So I did what I always do when something related to banking arises: I knocked on the doors of my colleagues Doug Diamond and […]