Regulators’ Irrational Rationality and Bankers’ Rational Irrationality: Too Big to Fail, Self-Regulation, Moral Hazard and the Global Financial Crisis 2007–2009

Banks and other financial institutions which were „too-big- to-fail“ (TBTF) played a central role in the Global Financial Crisis of 2007– 2009. The article lays out how misguided policies enabled banks to grow both in size as well as in complexity and therefore acquire TBTF status, particularly in the 10-year period preceding the crisis. The article then proceeds by detailing how an ill-designed policy framework, relying on supposed market approaches to regulation – including self-regulation and credit rating agencies – enabled TBTF financial institutions to game the system. They were thereby able to exploit the negative externalities which the flawed policy framework – in connection with TBTF status – had granted to large, systemically important financial institutions. The article therefore identifies defective government policies as the chief cause of the financial crisis of 2007–2009, revealing an urgent need for financial sector reform.Banks and other financial institutions which were „too-big- to-fail“ (TBTF) played a central role in the Global Financial Crisis of 2007– 2009. The article lays out how misguided policies enabled banks to grow both in size as well as in complexity and therefore acquire TBTF status, particularly in the 10-year period preceding the crisis. The article then proceeds by detailing how an ill-designed policy framework, relying on supposed market approaches to regulation – including self-regulation and credit rating agencies – enabled TBTF financial institutions to game the system. They were thereby able to exploit the negative externalities which the flawed policy framework – in connection with TBTF status – had granted to large, systemically important financial institutions. The article therefore identifies defective government policies as the chief cause of the financial crisis of 2007–2009, revealing an urgent need for financial sector reform

The social value of expressing personal and general belief in a just world in different contexts

Research conducted in France and Portugal has consistently found that expressing high versus low Belief in a Personal Just World (BJW-P) is more socially valued. Results concerning the Belief in a General Just World (BJW-G) have been mixed. We propose this reflects a higher resistance of BJW-P social value to contextual changes. Testing this idea was the main goal of three experimental studies conducted in France, Germany and Portugal. In Study 1 (N = 283) participants expressed higher BJW-G when asked to convey a positive versus a negative image in a job application at a bank. The opposite pattern showed up when they applied for a job at a Human Rights NGO, an employment assistance institution and a trade union. Participants expressed higher BJW-P in all contexts, except at the trade union (no significant differences). In Study 2 (N = 489) participants judged bogus candidates who expressed high or low BJW-P/G while applying for a job at the same contexts. The patterns of judgments replicated those of self-presentations in Study 1. In Study 3 (N = 158), participants were asked to judge targets who expressed high versus moderate versus low BJW-P at a trade union. The former target was more socially valued than the other two. High versus low BJW-P expression was associated with higher stamina and less unadjusted self-enhancement. We conclude that in Western societies the expression of BJW-P is more central to the legitimation of the status quo and that of BJW-G is more context sensitive.info:eu-repo/semantics/acceptedVersio

Genome-Wide Association Analysis of Autoantibody Positivity in Type 1 Diabetes Cases

The genetic basis of autoantibody production is largely unknown outside of associations located in the major histocompatibility complex (MHC) human leukocyte antigen (HLA) region. The aim of this study is the discovery of new genetic associations with autoantibody positivity using genome-wide association scan single nucleotide polymorphism (SNP) data in type 1 diabetes (T1D) patients with autoantibody measurements. We measured two anti-islet autoantibodies, glutamate decarboxylase (GADA, n = 2,506), insulinoma-associated antigen 2 (IA-2A, n = 2,498), antibodies to the autoimmune thyroid (Graves') disease (AITD) autoantigen thyroid peroxidase (TPOA, n = 8,300), and antibodies against gastric parietal cells (PCA, n = 4,328) that are associated with autoimmune gastritis. Two loci passed a stringent genome-wide significance level (p<10(-10)): 1q23/FCRL3 with IA-2A and 9q34/ABO with PCA. Eleven of 52 non-MHC T1D loci showed evidence of association with at least one autoantibody at a false discovery rate of 16%: 16p11/IL27-IA-2A, 2q24/IFIH1-IA-2A and PCA, 2q32/STAT4-TPOA, 10p15/IL2RA-GADA, 6q15/BACH2-TPOA, 21q22/UBASH3A-TPOA, 1p13/PTPN22-TPOA, 2q33/CTLA4-TPOA, 4q27/IL2/TPOA, 15q14/RASGRP1/TPOA, and 12q24/SH2B3-GADA and TPOA. Analysis of the TPOA-associated loci in 2,477 cases with Graves' disease identified two new AITD loci (BACH2 and UBASH3A)

The paradoxical genesis of too-big-to-fail

At least since the Global Financial Crisis of 2007-2009, the problem of too-big-to-fail (TBTF) has received widespread attention. The research conducted in this context has, however, generally focused on the econometric aspect and the contribution of the TBTF doctrine to the financial crisis of 2007-2009, while the economic historical approach has been confined to tracing the doctrine to its first appearance. This paper attempts to fill this gap in the academic literature by offering an explanation for why, as opposed to how, the TBTF doctrine has developed. This paper identifies the US population’s distrust and at times hostility against the prospect of concentration of power in large financial institutions as the causal factor leading to the TBTF phenomenon. The resulting socially non-optimal regulation favoured a fragmented and fragile banking system based on small unit banks at the cost of more diversified branch banks. The Great Depression impressively highlighted the deep structural flaws of the US banking system. At the same time, however, it caused a shift in the public opinion, which had generally been opposed to deposit insurance, and thereby aligned the public interest with that of small banks, which would profit most from deposit insurance. The newly acquired public and political support enabled weak unit banks to lobby successfully against reforming the banking structure and instead for the adaption of federal deposit insurance. However, the Federal Deposit Insurance Corporation (FDIC) only addressed the symptoms of the weak banking industry but not its causes. Moreover, the strongly biased FDIC policies have generally favoured creditors at large banks, which ultimately led to the TBTF doctrine which, in turn, provided banks with a non-technical incentive to grow in size in order to gain TBTF protection. Initially aimed at preserving the US financial landscape based on small unit banks, the FDIC as the main conduit for TBTF rescues thus became the main driver for big bank corporate welfare. Deposit insurance gave rise to TBTF and, at the same time, put small banks deemed “too-small-to-safe” at a competitive disadvantage, further accelerating the trend towards increasingly large and complex banks