This month is a perfect example of the shortcomings of gov't headline statistics in assessing the economy. Loss of low-wage jobs is not surprising. Jobs incapable of lifting workers out of poverty shouldn't be considered employment for the purpose of setting economic policy. 3/3
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Gene Ludwig
@geneludwig
Managing Partner | CEO Ludwig Advisors | Chair LISEP | Former US Comptroller of the Currency | Founder/Fmr CEO Promontory family of companies
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By contrast, the Bureau of Labor Statistics reports an increase in the jobless rate from 3.4% to 3.7%. This is primarily due to the loss of low-wage part-time workers, counted as “employed” by the BLS – but classified as “functionally unemployed” by LISEP in previous reports. 2/3
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The percentage of workers with living-wage jobs improved in May, with “functional unemployment” dropping to its lowest level in months for all major demographic groups, according to the monthly True Rate of Unemployment report by the Ludwig Institute. 1/3
lisep.org/content/june-2
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LMI families are putting off healthcare due to cost, notes for : 38% last year alone. As noted by the LISEP's True Living Cost index (lisep.org/tlc), this is a problem that has been building for at least 20 years.
As noted by ’s , 5m households are behind on rent, with sky high housing costs to blame. Rather than raising interest rates to curb inflation – which kills jobs – policy should focus on reducing costs, like easing the housing shortage.
An excellent podcast with ’s and ’s discussing the racial wealth gap, why it persists, and how can we close it.
americanbanker.com/podcast/what-w
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"Because we've always done it that way" has never been a good answer, even more so when it comes to managing the economy. In this edition of The Ludwig Report, we discuss shortfalls of traditional headline statistics in setting economic policy.
mailchi.mp/35a9ba72861d/t
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As I said in an interview with , US banking regulators already have the tools to manage any banking crisis that may arise -- they just need the authority to act quickly. That's where a change in law is needed.
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Acting Comptroller Michael Hsu makes an important observation, calling upon banks to innovate and consider adjustments to the screening process to expand financial access to nearly 6m unbanked households in the US.
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Had a good conversation recently with ’s regarding the US banking system and the need for banks of all sizes to serve the diverse needs of consumers and businesses.
As I stated for 's , it has been about 4 years since we've had a confirmed Comptroller of the Currency. I urge the nomination & confirmation of a candidate in short order. Acting Comptroller Michael Hsu would be a fine choice.
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Today the Ludwig Institute issued its measure of the functionally unemployed, the True Rate of Unemployment. Our findings: TRU is up 0.2 points, to 23.1%. TRU for Black workers is down to 24.5%, but may be due to workers dropping out of the labor force.lisep.org/tru
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Fed working paper: economic policy raising interest rates reduces LMI homebuyers by 2 percentage points for each 1 percentage point rate hike. Perhaps it’s time to reevaluate this type of economic policy.
federalreserve.gov/econres/feds/f
ICYMI -- the video link to "Risk and Regulation: The State of US Banking" at the #MIGlobal conference, where I had the honor to serve on a panel with , , 's Nicole Elam & moderator .
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I would like to thank my fellow panelists for an interesting discussion during yesterday's "Risk and Regulation: The State of US Banking" session at the #MIGlobal conference: , , 's Nicole Elam & moderator .
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Cognitive bias is impairing judgments and markets are looking for explanations of what went wrong. Yes, the three banks at the center of the banking industry turmoil had risk management challenges—but as a direct consequence of policy actions, not a fatal flaw in the banks. 6/6
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No one foresaw the exodus of deposits from the banking system that occurred when anxiety set in about the real-world implications of rate hikes. But the unfortunate truth is that the exodus will inevitably crimp lenders’ ability to extend credit. 5/6
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A credit crunch isn’t just a slowdown in lending in response to a series of policy actions, it’s a sudden tightening of lending standards among banks brought on by fear, bank runs, regulatory backlash, or getting burned by defaults. This appears to be what's unfolding. 4/6
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Multiple signs are already pointing to tighter credit. The Federal Reserve’s senior loan officer survey in January showed loan standards tightening across the board, closing in on levels not experienced since the Global Financial Crisis in 2008. 3/6
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The Fed’s pattern of interest rate hikes may be nearing an end, but the economic damage is done as the result of the fastest series of rate hikes in 40 years. And because it takes time for the effects of interest rate increases to manifest, the peak pain period is yet to come.2/6
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It’s tempting to breathe a sigh of relief and hope that the arranged marriage of First Republic Bank to JP Morgan Chase signals the end of the financial panic that began in early March. Not so fast. The next problem is already taking shape, and it’s a credit crunch. 1/6
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Looking forward to next week's "Risk and Regulation: The State of US Banking" panel discussion during the #MIGlobal conference, where I will join , , , and moderator Mike Piwowar.
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Today the Ludwig Institute released its report of the True Rate of Unemployment by MSA for 2022. Findings: Florida's Space Coast had the lowest "functional unemployment" rate at 11.1%; McAllen,Texas, had the highest rate at 46.8%. Full report at lisep.org/local.
This week the Ludwig Institute issued its measure of the "functionally unemployed" - the True Rate of Unemployment - for March. Overall TRU was stable at 22.9%. TRU for Black workers is up 0.8 points to 25.4%; Hispanic workers, down 1.4 points (27.2%). lisep.org/tru
Today the Ludwig Institute issued its True Weekly Earnings report. Findings: inflation-adjusted wages for the median worker dropped by a total of $10/week since Q3 2022. Low-wage workers, Black and Latino workers, fared even worse. lisep.org/twe
In my op-ed for today's 's , we discuss how Washington is consumed with reining in crypto activity - and why regulators and policymakers need to consider the unintended consequences of any clumsy approach.
As I related to ' , it's time to take a look at the nation's deposit insurance system:
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If a fireman is called in to stop a wildfire before it spreads, he doesn’t have time to convene a committee and vote before dousing it with water. Banks and regulators need to develop new tools that address these new problems now. 5/5
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Financial institution risk mgmt & regulatory tools have not been modernized to accommodate the technological phenomenon of increasing speed & interconnectivity. Some Dodd-Frank rules even slow regulatory response time, requiring committee votes before action is possible. 4/5
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The bank run on SVB was multiple times – by one calculation 40 times – faster than the run on Washington Mutual, a similarly sized entity 15 years ago in the midst of the Great Recession. 3/5
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The crisis is only partly about mistakes by bank management and supervision. It is fundamentally about the speed and interconnectivity of modern finance, both from a communications and financial perspective. 2/5
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The financial crisis that started with SVB depositor runs that resulted in two bank failures, with another sizable entity on life support, is not well understood, as evidenced by this week's hearings. Until it is understood and relevant actions taken, more turmoil is to come. 1/5
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Enjoyed reconnecting with
and Robert Schmidt for their newsletter. Lots of stuff to talk about!
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Capitol Account: Talking the New Era of Bank Runs; Coinbase Reveals SEC Enforcement Notice; Bankers Hit Washington; Lawmakers Begin to Lay Out SVB Response Plans capitolaccountdc.com/p/talking-the-
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The Ludwig Institute has issued its True Rate of Unemployment report for February. Findings: The overall percentage of workers with living-wage jobs improved, but the gap between men and women grew by two full percentage points. Full report at lisep.org.
Yesterday on I had the opportunity to discuss the status of the banking industry and banking regulation with and . I enjoyed the discussion, and their excellent insight!
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Enjoyed my conversation with 's on the banking industry, and the need to ensure a level playing field for banks of all sizes.
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Had a great conversation with and on Friday, where we discussed the challenges facing the banking industry (segment begins at 1:07).
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Bank-like regulation needs to be extended to non-bank financial institutions, using the Fed’s stated standard of “same activity, same size, same regulation.” Thus far it has been a stated standard that may need legislation. 7/7
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On-site examination and supervision — and the guts to enforce needed risk mitigation where bank management has been derelict — is a must. 6/7
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In this age of social media-induced volatility, financial system regulation and supervision must be upgraded, including from a technology perspective. Capital charges and other macro prudential tools are useful, but not good enough. 5/7
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