Lucas Puente

Breathing Life Into the Wrong Patient

Student blogger Lucas Puente reveals good, the bad, and the ugly in the banking industry.

Think of our economy like a bleeding patient, dying in the emergency room. The triage nurse comes in, evaluates the patients, and prioritizes their suffering, deciding who gets treated first. In the case of our financial system, the Federal Reserve saved the wrong patient: if a bank bailout was necessary it should have been focused on banks whose primary business is lending, which fuels the economy, not trading, which doesn’t.

Paul Krugman wrote an enlightening column in Monday’s Times about the state of the financial industry. Among…

Shoulda, Woulda, Coulda: Where the Treasury’s Loyalty Lies

Student blogger Lucas Puente reveals good, the bad, and the ugly in the banking industry.

Here is a question that has been boggling my mind for a while: In protecting the financial system, should the Treasury Department be primarily looking out for the banks or the taxpayer?

Unfortunately, what the Treasury should do has not mattered much throughout this financial crisis or we would have seen real financial reform and less no-questions-asked money doled out to Wall Street. It seems clear to me that the Treasury’s main concern has been the banks, sometimes to the detriment of the taxpayer. Moving forward, it’s…

Feeding the Beast: Bank industry fills politico coffers, and Washington returns the favor

Student blogger Lucas Puente reveals good, the bad, and the ugly in the banking industry.

Money talks louder than regulation, as we have seen time and again since the economic collapse began. From Ponzi-schemester Bernie Madoff to the outrageous bonuses handed out like chewing gum by banking giants, insufficient or absent regulatory policies have fed the beast that Wall Street has become.

Acknowledging this, the administration and Congress have begun pushing for an overhaul of the regulatory infrastructure in order to prevent another such destructive crisis in the future. With a variety of players on board, including the vital support of…

Chris Dodd’s plan to combine federal banking regulators gets pushback from reform-busters

Student blogger Lucas Puente sees benefits to a super-regulator…

Regulatory arbitrage is a dangerous  little Wall Street practice that, if left unchecked, threatens the stability of the economy. How it works: Under the current system, banks can shop around to find the most advantageous charter, which basically allows them to choose what kind of regulatory supervision they will have.  And with their future growth (or shrinkage) more or less tied to the number of banks they regulate, today’s regulators have an unmistakable incentive to provide a permissive regulatory environment that favors the banks. Under this perverse system, it’s simply not in…

One year after Lehman, the need for stronger regulation is resoundingly clear

Student blogger Lucas Puente reveals good, the bad, and the ugly in the banking industry.

On this day exactly one year ago, Lehman Brothers, an investment bank founded in 1850, declared bankruptcy in the early morning. Later that day, we learned that two of America’s most prominent financial institutions — AIG and Washington Mutual — were essentially on life support. Meanwhile, perhaps the country’s most well-known investment bank, Merrill Lynch, had sold itself to Bank of America in an abrupt transaction designed to prevent Merrill Lynch’s failure. And all this just a week after Fannie Mae and Freddie Mac had…

Collateralized Death Obligations

As you may have read here yesterday, Wall Street is at it again, using an old dog to do a new trick. Enticed by the profitability of mortgage securitization, the players on Wall Street have decided to use that tool for a new product: life settlements, or the life insurance policies that holders sell for cash prior to death. Wall Street is extremely excited about these assets. Why? Their value would be completely unaffected by the performance of all other securities in the market — instant portfolio diversification! — and, like mortgage securities, the assets would provide an attractive stream…

Shrugging off Ayn Rand? Time to change course at the nation’s biz schools

Are academic programs moving beyond the free market theory that helped cause the crisis?  Lucas Puente, a member of the Roosevelt Institute’s Campus Network and a UGA business major, takes a look.

As an undergraduate preparing to graduate from business school, one aspect of the present financial crisis is, for me, poignant and personal: role of business school curricula.  Consensus seems to be that they’re failing, and going into my fourth year as a business major at the University of Georgia, I have to agree.

Among the more compelling versions of this argument is Peter Navarro’s scathing Business Week article.  Navarro surveyed the…

What gives at the FDIC?

ND20 reveals good, the bad, and the ugly in the banking industry.

Last Friday was an expensive day at the FDIC.  By the close of business, the lending depositor was out another $6.8 billion. Alabama regulators shut down Colonial BancGroup, the biggest bank to fail so far in 2009.  With $25 billion in assets and 346 branches, this is the sixth largest bank failure ever.  The FDIC brokered a deal through which BB&T will take over the bulk of Colonial’s assets and depository obligations, costing the FDIC an estimated $2.8 billion — and further inflating BB&T, already the country’s 18th largest bank, and continuing the…

Good bank, bad bank

ND20 reveals good, the bad, and the ugly in the banking industry.

Last week, we learned that the Obama administration is weighing the creation of a “bad bank” for the toxic assets of Fannie Mae and Freddie Mac, which the government has propped up with $400 billion explicit guarantee of their debt.  This is probably the biggest Fannie and Freddie news we’re going to hear for awhile. FDIC’s Sheila Bair floated the idea of consolidating troubled assets into one big bad bank.

Obama’s National Economic Council is slated to discuss “bad bank”-ing Fannie and Freddie on Thursday.  The idea is this: Fannie and Freddie would dump…

For the real story on banks, look beneath the TARP

Student blogger Lucas Puente reveals good, the bad, and the ugly in the banking industry.

Last fall, as he was injecting hundreds of billions of dollars into the financial services industry through the “Troubled Assets Relief Program” (TARP), then-Treasury Secretary Hank Paulson did what business guys do: he built in a provision for making money. In this case, where the investment dollars are public, so’s the profit. The Capital Purchase Program (CPP) was designed to give taxpayers a decent return on TARP. But now the banks are using an obscure part of the agreement to get out of paying up.

The CPP…