Three Futures for Postcrisis Banking in the Americas: The Financial Trilemma and the Wall Street Complex

This would seem an opportune moment to reshape banking systems in the Americas. But any effort to rethink and improve banking must acknowledge three major barriers. The first is a crisis of vision: there has been too little consideration of what kind of banking system would work best for national economies in the Americas. The other two constraints are structural. Banking systems in Mexico and the rest of Latin America face a financial regulation trilemma, the logic and implications of which are similar to those of smaller nations' macroeconomic policy trilemma. The ability of these nations to impose rules that would pull banking systems in the direction of being more socially productive and economically functional is constrained both by regional economic compacts (in the case of Mexico, NAFTA) and by having a large share of the domestic banking market operated by multinational banks. For the United States, the structural problem involves the huge divide between Wall Street megabanks and the remainder of the U.S. banking system. The ambitions, modes of operation, and economic effects of these two different elements of U.S. banking are quite different. The success, if not survival, of one element depends on the creation of a regulatory atmosphere and set of enabling federal government subsidies or supports that is inconsistent with the success, or survival, of the other element

A Case for Successful Microfinance Programs in China

Finding ways of empowering the poor in the impressive growth process in China is of key importance. Following the trend started by non- governmental and multilateral organizations, government officials have put microfinance on top of their agenda. While this paper supports the view that China represents a potentially fertile soil for microfinance programs to succeed in their attempt at reducing poverty, it pins-down to a number of methodological difficulties due to a misleading replication of the Grameen system, which emphasizes the group lending methodology. Such difficulties have been exacerbated by the increased involvement of the government over the past decade. In particular, we argue that excessive government intervention has come at the expense of borrowers’ discipline. It has also lowered the probability of government-sponsored microfinance institutions to succeed in becoming self-sufficient and thereby further attracting commercial loans and international aid. We spell out a few guidelines for an improved design of government support to microfinance in China. These guidelines can potentially apply to other developing countries and transition economies where financial markets are also weak