A Banker’s Perspective on the Financial Crisis

During the last several years Robert Amzallag as Senior Fellow at CIRANO has taken an active interest in the research and transfer activities undertaken by the Finance Group. He has suggested initiatives that would be relevant to the financial industry in Montreal, particularly in derivative products and concerning practical issues in governance at the director’s level. As the former President and CEO at BNP Paribas (Canada), Mr. Amzallag is certainly well placed to offer insightful commentary on the financial crisis that has preoccupied us over the last several months. Mr. Amzallag’s presentation combines a retrospective analysis of root causes of the crisis followed by some thoughts on what’s to come. As to causes, he isolates three trends that have been gathering force over several decades. These include the erosion of certain stabilizing factors, particularly in the credit market, that has lead to extreme concentrations of risk. Looking to the future, Mr. Amzallag cautiously explores the consequences of several scenarios or responses to the crisis. The first two represent the pursuit of policies reflecting established political sensibilities involving different degrees of government intervention. The third represents a more thoughtful re-appraisal of the different functions that the key players—governments, central banks, regulators and financial institutions —should pursue and should be left to pursue. We have also invited CIRANO Fellow Michel Magnan, Professor of Accounting at Concordia’s John Molson School of Business to present an overview of the controversy surrounding marking to market, an issue highlighted by Mr. Amzallag as an important aspect of the crisis. Professor Michel Magnan takes up the technical but crucial issue of whether fair-value accounting [FVA] was an inadvertent messenger of the financial crisis or was an actual contributor to the crisis. The point is far from academic. By way of appendices to these presentations, the Finance Group has prepared a graphic tool that permits the time-series presentation of key financial indicators against the historical background of the crisis. As well, we have prepared a primer on structured products, including synthetic CDOs, that have played a lead role in the current crisis. This presentation leads naturally to the software module developed at CIRANO that explores the risk management dimensions of these products.

From one crisis to another: a banker's perspective

Once the 2009 financial meltdown was avoided through central banks’ decisive action and governments’ swift bailouts, the general consensus was that the usual recipes that took us back to prosperity and growth after each of the post war recessions should undoubtedly work again. The main tools selected by the authorities were fiscal stimulus, lowering of interest rates combined with monetary easing, politically motivated legislation and high profile chastising to keep the public satisfied that the authorities were extirpating the roots of the problem. These remedies were applied and, for a while, seemed to work: stock prices recovered, the US job market stabilized, bail out money started to be repaid and economic growth, although sluggish, appeared to be well into positive territory. However, two years later, another serious financial crisis unexpectedly struck. There seemed to be no reason for it. Indeed, this had not been the first time we faced a real estate/financial crisis. For example, in 1990, real estate prices went down even more than they have had since 2008. The amounts dedicated to the stimulus packages and monetary easing were unprecedented and imposing pieces of legislation were quickly passed. So how could this have happened? The answer to this question requires a careful analysis of the nature of the 2008 crisis, the then prevailing economic conditions and the relevance of the measures taken.

La crise financière vue par un banquier

Au cours des dernières années, Robert Amzallag, Fellow invité du CIRANO, s’est beaucoup intéressé à la recherche et aux activités de transfert menées par le Groupe Finance. Il a proposé des initiatives sur des sujets d’actualité touchant le marché financier de Montréal. Notamment à titre de Président et chef de la direction de BNP Paribas (Canada), Monsieur Amzallag est bien placé pour faire des observations éclairées sur la crise financière. La présentation de monsieur Amzallag consiste en une analyse rétrospective des causes fondamentales de la crise, suivie d’une réflexion sur les événements à prévoir. Pour ce qui est des causes, il isole trois tendances qui ont pris de l’ampleur au cours des dernières décennies. Ces tendances comprennent l’érosion de certains facteurs de stabilisation, particulièrement dans le marché du crédit, qui contribuent à des concentrations excessives du risque. Dans une perspective d’avenir, monsieur Amzallag explore les implications de trois scénarios ou réponses liés à la crise. Les deux premiers scénarios représentent l’application de règles de conduite reflétant les sensibilités politiques établies. Le troisième scénario consiste en une réévaluation sérieuse des différentes fonctions que les partenaires clés, gouvernements, banques centrales, organismes de réglementation et institutions financières, devraient assumer et devraient avoir la latitude nécessaire pour l’assumer. Nous avons aussi invité monsieur Michel Magnan, Fellow CIRANO et professeur à l’École de gestion John Molson, Université Concordia à présenter un survol de la controverse entourant l’évaluation des prix du marché, une question qui constitue, d’après monsieur Amzallag, un aspect important de la crise. Il examine les fondements théoriques et empiriques de la comptabilisation de la juste valeur [fair value accounting (FVA)]. D’après le professeur Magnan, il existe des preuves appuyant la théorie selon laquelle la FVA ne constitue pas seulement un messager, mais qu’elle peut avoir contribué à l’accélération de la crise. Dans les annexes qui suivent les interventions des invités, le Groupe Finance a préparé un graphique permettant de présenter des séries chronologiques des principaux indicateurs financiers par rapport au contexte historique de la crise. Nous avons également préparé une introduction aux produits structurés, incluant les obligations synthétiques adossées à des prêts (synthetic collateralized debt obligations - cdos), lesquels ont joué un rôle de premier plan dans la crise actuelle. Cette présentation nous amène naturellement à un module logiciel élaboré au CIRANO et qui explore les dimensions que prennent ces produits dans le cadre de la gestion du risque.

La crise financière : un an plus tard

This paper is meant to provide a fresh retrospective on the events shaping the evolution of the financial crisis and economic recession since last year. While continuing and updating last year’s analysis, the author offers an assessment of the three potential scenarios through which the crisis could have evolved. This update on the crisis derives from a reflection, sometimes a criticism, of the key players' role in both the causes and the solutions. Those are the governments, central banks, regulators, financial institutions, and their directors. It is from this retrospective analysis that the author can conclude by sharing his impression regarding future developments of the economy and the financial sector. Cette publication se veut un retour actualisé sur les événements de la dernière année concernant l’évolution de la crise financière et de la récession économique. Poursuivant et mettant à jour l’analyse d’il y a un an, l’auteur offre une évaluation des trois scénarios potentiels qu’aurait pu suivre la crise. Ce retour sur la crise se fait à travers une réflexion, et parfois une critique, concernant le rôle des joueurs clés qui sont impliqués autant dans les causes que dans les solutions. Il s’agit des gouvernements, des banques centrales, des autorités de régulation, des institutions financières ainsi que des dirigeants de celles-ci. C’est à partir de cette analyse rétrospective que l’auteur peut conclure en partageant son impression quant aux développements futurs de l’économie et du secteur financier. Version disponible bientôt.financial crisis, recession, government intervention, financial regulation, financial history, financial forecasting , crise financière, récession, intervention gouvernementale, régulation financière, histoire financière, prévision financière

dREAM co-operates with insulator-binding proteins and regulates expression at divergently paired genes

dREAM complexes represent the predominant form of E2F/RBF repressor complexes in Drosophila. dREAM associates with thousands of sites in the fly genome but its mechanism of action is unknown. To understand the genomic context in which dREAM acts we examined the distribution and localization of Drosophila E2F and dREAM proteins. Here we report a striking and unexpected overlap between dE2F2/dREAM sites and binding sites for the insulator-binding proteins CP190 and Beaf-32. Genetic assays show that these components functionally co-operate and chromatin immunoprecipitation experiments on mutant animals demonstrate that dE2F2 is important for association of CP190 with chromatin. dE2F2/dREAM binding sites are enriched at divergently transcribed genes, and the majority of genes upregulated by dE2F2 depletion represent the repressed half of a differentially expressed, divergently transcribed pair of genes. Analysis of mutant animals confirms that dREAM and CP190 are similarly required for transcriptional integrity at these gene pairs and suggest that dREAM functions in concert with CP190 to establish boundaries between repressed/activated genes. Consistent with the idea that dREAM co-operates with insulator-binding proteins, genomic regions bound by dREAM possess enhancer-blocking activity that depends on multiple dREAM components. These findings suggest that dREAM functions in the organization of transcriptional domains

TSAP6 Facilitates the Secretion of Translationally Controlled Tumor Protein/Histamine-releasing Factor via a Nonclassical Pathway

International audienceTranslationally controlled tumor protein (TCTP) is cytoplasmic and structurally related to guanine-nucleotide free chaperones. TCTP (also called histamine-releasing factor) has been described previously as a secreted protein that participates in inflammatory responses by promoting the release of histamine. How TCTP is eventually exported out of the cell to promote such activities is unknown. Here we show that TCTP secretion was insensitive to either brefeldin A or monensin, suggesting that it proceeds via an endoplasmic reticulum/Golgi-independent or nonclassical pathway. Moreover, our analyses also suggest that secreted TCTP originates from pre-existing pools. TSAP6, a p53-inducible 5-6 transmembrane protein, was found to interact with TCTP in a yeast two-hybrid hunt. GST pull down assays confirmed their direct interaction, and immunofluorescence analysis revealed their partial co-distribution to vesicular-like structures at the plasma membrane and around the nucleus. Functionally, the overexpression of TSAP6 consistently leads to enhanced secretion of both endogenously and exogenously expressed TCTP. Finally, we found TCTP in preparations of small secreted vesicles called exosomes, which have been suggested as a possible pathway for nonclassical secretion. Overexpression of TSAP6 also increased TCTP levels in exosome preparations. Altogether, these data identify a novel role for TSAP6 in the export of TCTP and indicate that this multipass membrane protein could have a general role in the regulation of vesicular trafficking and secretion

Room-temperature soft mode and ferroelectric like polarization in SrTiO3 ultrathin films: Infrared and ab initio study

International audienceDue to the remarkable possibilities of epitaxially growing strontium titanate (SrTiO 3 or STO) on silicon, this oxide is widely used as a buffer layer for integrating other perovskite oxides which allows for the development of various functional electronic devices on silicon. Moreover, STO is known to be an incipient ferroelectric in bulk but may become ferroelectric when in the form of strained ultrathin films. Given the importance of the potential applications for electronics if this property is demonstrated, we performed a spectroscopic study of STO on Si(001) templates coupling experimental and ab initio investigations. We selected six samples of ultrathin films: three strained samples (of thickness 4, 9 and 48 nm) and three relaxed samples (of equivalent thickness). Their infrared spectra show that both the mechanical stress and the thickness play major roles: higher energy modes evolve as soft modes in thinner strained films. In order to support these observations, the dynamical ab initio calculations allowed deriving the conditions for STO films to become ferroelectric at room temperature as shown by the development of a soft mode and the divergence of the in-plane dielectric constant