During the economic crisis, we saw an interesting pattern of activity among commercial banks. As prices of securities dramatically dropped, banks purchased the securities, looking to make profits when the prices later increased. This had an effect on lending, as banks used their capital to buy securities rather than make loans. This despite the banks taking billions at the time from the Federal Reserve in liquidity support.
Now, regulators around the world are debating whether banks should be allowed to trade in securities. In the U.S. we have the Volcker rule, which prevents banks from proprietary trading. In Europe, they have the Liikanen Report. But an important question in these discussions is what are the benefits and costs to not having banks trade securities?
Answering that question has been difficult due to a lack of comprehensive micro data at the security level on banks’ trading activities. However, in a recent study, my colleagues and I were given access to a unique, proprietary dataset from the Bundesbank (the German central bank) that provides information on security-level holdings for all banks in Germany at a quarterly frequency for the period between 2005 and 2012.
So we were able to analyze whether, during a financial crisis, banks with higher trading expertise increase their investments in securities, especially in securities that had a larger price drop, to profit from the trading opportunities. Further, we examined how this impacts lending.
Mobile payments will be one of the hottest businesses in 2015 as consumers increasingly swap cash and credit cards for their smartphones. How fast the mobile payment market segment grows, however, will depend on consumer trust, security and ease of use.
While consumer-to-business (C2B) payments have taken off with companies like Apple Pay and PayPal, consumer-to-consumer (C2C) payments are the next frontier.
Reliable statistics on C2C mobile transaction growth are hard to come by. But according to Gartner Research, by 2017 the total worldwide mobile payments market is expected to reach 450 million users (18% growth a year) and be worth $721 billion (35% a year).
In his new book, Superpower, Eurasia Group’s Ian Bremmer suggests three strategic options for America to remain a global superpower. But while many lawmakers appear to be taking his preferred option of an “Independent America” to heart, we believe it’s the wrong choice. In fact, Bremmer leaves out a fourth approach that we feel is the best strategy for America to win not only on the current global chessboard, but on the next one as well.
With the US reluctantly being drawn back into putting out fires in the Middle East, warily watching Russian aggression, facing a stop-and-start “Asia pivot,” and on the sidelines the Greek crisis unfolds or Chinese stock markets go through turmoil, reviewing these options is timely for President Obama; they may be even more important for his successor.
Lee Ullmann, Director of the MIT Sloan Latin America Office Office of International Programs
Approximately 34 million people in Latin America and the Caribbean don’t have electricity in their homes and 75% of the regional energy matrix relies on nonrenewable sources of energy, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). However, increasing access to energy and increasing renewable energies and efficiency are critical for sustainable development. In recognition of this major need, the United Nations has made it a goal to make sustainable energy for everyone a reality by 2030 in its Sustainable Energy for All (SE4ALL) global initiative. Read More »
MIT Sloan alumna Aliza Blachman O’Keeffe, SM ’90, and chair of the alumni board, sits down with Dave Vellante and Stu Miniman from theCube for the live post-show to the MIT Conference on the Digital Economy: The Second Machine Age. O’Keeffe discusses the purpose of the MIT Sloan Alumni Board and how its members are using technology and innovation to reach a global alumni base.
On April 10, 2015, the MIT Digital Economy Conference: The Second Machine Age, led by Erik Brynjolfsson, director of the Initiative on the Digital Economy, and Andrew McAfee, co-director of the Initiative on the Digital Economy, featured a series of discussions that highlight MIT’s role in both understanding and shaping our increasingly digital world.
Aliza Blachman O’Keeffe, MBA ’90, is chair of the alumni board.