House Report on Consumers First Act

Published by the House Financial Services Committee.

In the 115th Congress, the Committee held a hearing entitled “A Legislative Proposal to Create Hope and Opportunity for Investors, Consumers and Entrepreneurs,” on April 26 and April 28, 2017. Testifying were Mr. Peter J. Wallison, Senior Fellow and Arthur F. Burn Fellow, Financial Policy Studies, American Enterprise Institute; Dr. Norbert J. Michel, Senior Research Fellow, Financial Regulations and Monetary Policy, The Heritage Foundation; The Honorable Michael S. Barr, Professor of Law, University of Michigan Law School; Mr. Alex J. Pollock, Distinguished Senior Fellow, The R Street Institute

Is Dodd-Frank council evolving, or throwing in the towel?

Published in the American Banker.

“In my judgment at the time” the FSOC was established was that “it was not well constructed,” said Alex Pollock, a senior fellow at the R Street Institute. “It’s set up to be naturally a logrolling operation among bureaucratic agencies. It’s a very hard kind of structure to get to work well, because everybody wants to defend his own territory from encroachment by somebody else.” 

Pollock said the council’s ability to prevent crises should not be the sole criteria for judging the shift toward an activities-based approach, because the alternative of designating firms one by one might not succeed, either. “I think it’s worth a try.”

Cuestionan definición de servicios esenciales

Published in Metro PR.

Amanda Rivera, directora ejecutiva del Instituto del Desarrollo de la Juventud de Puerto Rico; Ana Cristina Gómez, profesora de la Escuela de Derecho de la Universidad de Puerto Rico (UPR), y Alex Pollock, del R Street Institute, también presentaron sus ponencias ante el comité cameral.

Demócratas y republicanos parecen ir por caminos distintos sobre la ley Promesa

Published in El Nuevo Dia.

El experto en finanzas Alex Pollock, del grupo R Street y quien fue invitado a la audiencia por la minoría republicana, recomendó que la JSF tenga más poderes y pidió al Congreso nombrar un jefe de finanzas que también funcione por encima del gobierno electo de Puerto Rico.

Como varios congresistas republicanos, Pollock criticó que el gobierno de Puerto Rico no haya publicado los informes financieros auditados de 2016, 2017 y 2018.

U.S House Natural Resources Committee Holds Hearing on Puerto Rico

Published in The Weekly Journal.

The U.S. House Committee on Natural Resources holds a hearing today on the status of Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA): Lessons Learned Three Years Later.

Natural Resources committee Chairman Raúl Grijalva presides the 10 a.m. oversight hearing at the Longworth House Office Building.

Gov. Ricardo Rosselló, Natalie A. Jaresko, Executive Director, Financial Oversight and Management Board for Puerto Rico; Martín Guzmán, Non-Resident Senior Fellow for Fiscal Policy, Espacios Abiertos; Amanda Rivera, Executive Director, The Institute for Youth Development of Puerto Rico; Ana Cristina Gómez-Pérez, Associate Professor, University of Puerto Rico; and Alex J. Pollock, Distinguished Senior Fellow, R Street Institute are part of the witness list.

This Week in Financial Regulation, March 6th

Published in the Captured Economy.

The American Interest gives the history of the banking industry since the 1950s. As the Federal Reserve gained more authority, the industry became riskier and more concentrated.

The Fed Has Not Been Independent – Perhaps It Should Be Restructured

Published in The Heritage Foundation.

The Federalist Society recently posted a podcast of me and R-Street’s Alex Pollock discussing Federal Reserve independence. This topic is always fun because so many people assume that (1) the Federal Reserve should be independent; and, (2) the Federal Reserve has always been independent.

The Fed Has Not Been Independent – Perhaps It Should Be Restructured

Published in Forbes.

The Federalist Society recently posted a podcast of me and R-Street’s Alex Pollock discussing Federal Reserve independence. This topic is always fun because so many people assume that (1) the Federal Reserve should be independent; and, (2) the Federal Reserve has always been independent.

Fannie And Freddie Need More Capital

Published in Forbes.

Another reason for ending the sweep would be that the Treasury has already been paid back its $187.5 billion injection plus the 10% compound dividend payments required under the terms of the conservatorship. Any GSE revenues flowing to Treasury exceeds what it is rightfully owed, and accomplishes little else that could be construed as positive.

Book notes: Finance and philosophy, by Alex J Pollock

From Central Banking:

Pollock started his working life as a banker. In 1970, he was a management trainee in the international banking department of the Continental Illinois Bank of Chicago. He stuck with it, but in 1984 – by which time he was a senior vice-president – Continental Illinois Bank failed.

He writes it was “intellectually stimulating – indeed, a highly educational experience”.

Read the rest here.

Is Dodd-Frank oversight council still relevant?

Published in American Banker.

“The biggest thing on FSOC’s to-do list is to designate Fannie Mae and Freddie Mac as the SIFIs they so obviously are in fact,” said Alex Pollock, distinguished senior fellow of finance, insurance and trade at the R Street Institute. “If Fannie and Freddie are not SIFIs, then no one in the world is a SIFI.

Banking expert warns Federal Reserve could go bankrupt if interest rates rise

There is growing concern among financial experts that the Federal Reserve will soon be bankrupt if interest rates continue to rise. One America’s Neil W. McCabe spoke with R Street’s Alex Pollock, who fears another financial crisis may be near.

The Bill Walton Show: Finance, Philosophy and more with Alex Pollock

Published by the Bill Walton Show.

People look to the government to prevent future financial crises and trust that politicians and economic experts can create policies to protect us and our 401(k) plans. We shouldn’t trust them. These experts are smart, mostly well-intentioned people but they can’t prevent the next crisis. No one can. Why is that? Why is a future crisis inevitable? I discuss these and many other questions with “Finance and Philosophy” author Alex Pollock.

Knowledge, Risk, and the Surprised Banker: A Conversation with Alex Pollock

Published in Law and Liberty’s LibertyLawTalk podcast.

Longtime Law and Liberty contributor Alex Pollock joins this edition of LibertyLawTalk to discuss his new book Finance and Philosophy.

What will cryptocurrency be like in 10 years?

Published in ReadWrite.

The second issue the subcommittee raised was that of government-created cryptocurrencies. Alex J. Pollock of the R Street Institute said that: “In short, to have a central bank digital currency is a terrible idea — one of the worst financial ideas of recent times.” Pollock argued that “[The Federal Reserve] would automatically become the overwhelming credit allocator of the financial system. Its credit allocation would unavoidably be highly politicized. It would become merely a government commercial bank, with the taxpayers on the hook for its credit losses. The world’s experience with such politicized lenders makes a sad history.”

Two books that will enrich your understanding of banking and bank crises

Published in Real Clear Markets.

Over the summer, I had the pleasure of reading the prerelease versions of two books about banking and financial crises: Finance and Philosophy: Why We’re Always Surprised, by Alex J. Pollock, (Paul Dry Books, October 16, 2018), and Borrowed Time: Two Centuries of Booms, Busts, and Bailouts at Citi, by James Freeman and Vern McKinley (Harper Business, 2018). Pollock’s book is being released in October, and Freeman and McKinley’s book is already available. If the history of banking and financial crises interests you, I think you will find both books to be rich in content and enjoyable to read. I know I did.

In Finance and Philosophy Alex Pollock, a former president and CEO of the Federal Home Loan Bank of Chicago, applies his formidable intellect and a lifetime of banking experience to explain in a simple and entertaining way why we continue to have banking crises and why post-crisis regulatory reforms are doomed to fail.

Banking systems will be prone to crises so long as investors confuse risk and uncertainty writes Pollock. Risk can be modeled, assessed and managed, but not so uncertainty.

[…]

Pollock recounts numerous historical examples where the accuracy of heuristic models evaporated once investors and regulators adopted models to guide their actions. For example, in the recent financial crisis, institutions relied on models to parse the risk in subprime mortgage-backed securities. To describe the impact of uncertainty, Pollock quotes Tony Saunders “[t]he rocket scientists built a missile which landed on themselves.”

In Pollock’s view, over confidence in heuristic models is especially problematic when models are sanctioned by bank regulators or the Federal Reserve. For example, time and again, investors have been crushed when uncertainty reveals that investments like government bonds—presumed to be “riskless” in regulatory models— aren’t. Or markets presumed to be deep and dependably liquid—like commercial paper—cease to function.

The confusion between risk and uncertainty is not limited to private bankers and investors—in Pollock’s view, it is endemic among the modern central bankers entrusted with managing the economy. Unable to anticipate economic uncertainty, their economic models often misinterpret the economic tea leaves and lead central bankers (Pollock’s would-be “philosopher kings”) to adopt policies that magnify financial instability as they did in the great inflation of the 1970s and the great moderation (a.k.a. the housing bubble) more recently.

Pollock’s observations and historical examples are compelling, and his wide-ranging discussion of banking and financial crises is not only accessible, but a pleasure to read.

Is the Senate banking bill a big win for Wall Street? Yes and no

Published in Politifact.

Phone interview with Alex Pollock, senior fellow with the R Street Institute, March 15, 2018

Subcommittee examines ways to reform the Federal Reserve

Published by the House Financial Services Subcommittee on Monetary Policy and Trade.

“The proposals under consideration today are all parts of a timely and fundamental review of America’s central bank. As Congressman Huizenga has rightly said, ‘With the Federal Reserve having more power and responsibility than ever before, it is imperative the Fed…become more transparent and accountable.’… The Federal Reserve without question needs to be accountable to the Congress, be subject to appropriate check and balances, and be understood in the context of inherent financial and economic uncertainty. It would benefit from rebalancing of centralized vs. federal elements in its internal structures.” — Alex J. Pollock, Distinguished Senior Fellow, R Street Institute

Former FHLB Chicago President and CEO, Alex J. Pollock, named Finzat Block Senior Advisor

Published in Markets Insider.

Finzat Block LLC., a Block One Capital portfolio company, announced that Alex J. Pollock has become a Senior Advisor to the firm.  Mr. Pollock, former President and CEO of the Federal Home Loan Bank of Chicago, will provide Finzat with guidance regarding business strategy, product innovation, and executive leadership.

“Blockchain is emerging as a potential paradigm-shifting technology in mortgage finance.  I look forward to working with Finzat Block on using blockchain to restructure the technological underpinnings of mortgage market transactions,” Mr. Pollock said.

Mr. Pollock is currently a distinguished senior fellow at the R Street Institute in Washington, DC. Previously, he was a resident fellow at the American Enterprise Institute. As President and CEO of the Federal Home Loan Bank of Chicago from 1991 to 2004, Mr. Pollock was the creator of the MPF mortgage origination program that was the first to provide community financial institutions a way to share credit risk and provide a meaningful alternative to selling mortgages to Freddie Mac and Fannie Mae.

Mr. Pollock currently serves as a director of the CME Group (Chicago Mercantile Exchange), Great Lakes Higher Education Corporation and the Great Books Foundation, and is a member of the Advisory Board of the Heller College of Business at Roosevelt University.  He was also the past-President of the International Union for Housing Finance.

Mr. Pollock has written extensively on economic cycles, risk and uncertainty, mortgage markets, central banking and the politics of finance.  His new book, “Finance and Philosophy“, is expected to be published by Paul Dry Books in October of this year.

Mr. Pollock is a graduate of Williams College. He completed his MA at the University of Chicago and MPA in international affairs at Princeton University.

“We are fortunate to have Alex’s considerable experience and mortgage market knowledge on the team as Finzat strives to bring the benefits of blockchain into the mortgage mainstream”, said Gnanesh Coomaraswamy, Finzat founder and CEO.

Booming housing market today presents serious risk for future

Published in The Hill.

We are currently in the midst of a six-year boom in home prices. Aided by a growing economy, favorable demographic trends, monetary accommodation, […]