[59] Anat Admati on banks' need for more capital, better regulation





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Published on Feb 12, 2014

Today's show is about financial institutions.

Today's headline story is on MF Global. In 2010, Jon Corzine, the former governor of New Jersey and ousted head of Goldman Sachs, became CEO of MF Global and promptly revamped the company into a riskier full-service brokerage firm. But his vision came unstuck in October 2011, when Moody's downgraded the $40 billion company to junk status because of large bets MF Global had taken on the bonds of some of Europe's most indebted nations, causing the firm to fail. This week, a federal judge said he will allow a lawsuit seeking to hold Corzine and other MF Global executives responsible for the brokerage's collapse. Erin Ade reports.

Then, it is 7 years this week since the financial crisis started with British bank HSBC's shock announcement of large bad debt on subprime US mortgages. Stanford Finance and Economics Professor Anat Admati, author of "The Banker's New Clothes", has warned that banks are still woefully under-capitalized, and that they urgently need better regulation and more capital if our financial system is to be safe. Erin elicits pointed commentary from Admati on bank capital, bank regulation and shadow banking.

Wrapping up our banking theme, in today's "Big Deal", Erin and Boom Bust producer Edward Harrison discuss the questionable $13 billion Justice Department deal with JPMorgan Chase over bad mortgage loans. The non-profit group Better Markets has filed a lawsuit against the Justice Department to block what it calls an "unlawful" settlement.

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