Lessons from the banking fiasco in Cyprus
Video
About This Event

 

 

 

 

 

Event Summary

At an AEI event on Tuesday, financial experts joined AEI's Alex Pollock to discuss the lessons and wider implications of the banking crisis in Cyprus. Robert Eisenbeis of Cumberland Advisors outlined the developments in Cyprus relating to the European bailout, highlighting the proposed plans to tax both insured and uninsured depositors. Eisenbeis noted that while the resulting plan only taxed uninsured depositors, the resulting uncertainty weakened confidence in the eurozone's banking sector.

AEI's John Makin spoke out against the tax on depositors, arguing that the uncertainty resulting from the announcement conflicts with the need to ensure bank stability. Doug Elliott of the Brookings Institution agreed with the panelists that the plan to tax depositors was ill advised. He did, however, explain the decision in the context of geopolitical pressures, including the September elections in Germany, issues associated with bailing out Russian depositors, and the lack of effective political leadership in Cyprus.

AEI's Desmond Lachman predicted that Cyprus would inevitably suffer from an imploding economy and would have to leave the euro. He concluded that Cyprus missed its best opportunity to leave the euro in March when there was a freeze on bank withdrawals and capital controls were being imposed in any case, no matter what.
--Andre Gardiner

Event Description

Although Cyprus is a small country with a small economy, it has caused melodramatic banking and political dilemmas. What is the connection between banking systems and credit to sovereigns, between the insolvency of governments and the insolvency of banks, between large inflows of foreign deposits and deposit insurance, and between banking failures and political instability? When or under what conditions should bank depositors suffer losses, and which depositors? How should the crisis in Cyprus have been handled differently, and what are its wider international repercussions going forward? These and other relevant questions will be addressed by our expert panel.

If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.

Agenda

9:00 AM
Registration and Breakfast

9:15 AM
Panelists:
Robert Eisenbeis, Cumberland Advisors
Doug Elliott, Brookings Institution
Bert Ely, Ely and Co.
Desmond Lachman, AEI
John H. Makin, AEI

Moderator:
Alex J. Pollock, AEI

11:00 AM
Adjournment

Event Contact Information

For more information, please contact Emily Rapp at emily.rapp@aei.org, 202.419.5212

Media Contact Information

For media inquiries, please contact MediaServices@aei.org, 202.862.5829.

Speaker Biographies

Robert Eisenbeis is the vice chairman and chief monetary economist at Cumberland Advisors, where he advises the company's asset managers on US economic and financial market developments and their implications for investment and trading strategies. Eisenbeis was formerly executive vice president and director of research at the Federal Reserve Bank of Atlanta, where he advised the bank's president on monetary policy for Federal Open Market Committee deliberations and was in charge of basic research and policy analysis. Previously, he was the Wachovia Professor of Banking at the Kenan-Flagler School of Business at the University of North Carolina at Chapel Hill. He has also held senior positions at the Federal Reserve Board and Federal Deposit Insurance Corporation. Eisenbeis is a member of the Financial Economists Roundtable and a fellow of the National Association of Business Economics.

Doug Elliott, a fellow in economic studies at the Brookings Institution, is a member of the Initiative on Business and Public Policy. He is an expert on the worldwide financial sector and its regulation; on corporate, state, local pensions; and on the eurozone and its economic and financial governance, including the eurozone crisis, which he has written extensively about in the US, Europe, and Asia. A financial institutions investment banker for two decades — principally at J.P. Morgan — he was the founder and principal researcher for the Center on Federal Financial Institutions. He is the author of “Uncle Sam in Pinstripes: Evaluating the US Federal Credit Programs” (Brookings Institution Press, 2011), the only comprehensive review of the federal government’s credit activities to be written in the last quarter century. He has researched financial institutions or worked directly with them as clients in a range of capacities, including as an equities analyst, credit analyst, mergers and acquisitions specialist, relationship officer, and specialist in securitizations. His work encompasses banks, insurers, funds management firms, and other financial institutions. In addition to 14 years at J.P. Morgan, Elliott worked as an investment banker with Sanford Bernstein, Sandler O’Neill, and ABN AMRO. He has testified before the US House of Representatives and US Senate and participated in numerous speaking engagements, and has  appeared widely in major media outlets.

Bert Ely is a financial institutions and monetary policy consultant based in Alexandria, Virginia. He has consulted on deposit insurance and banking issues since 1981. Ely continuously monitors conditions in the banking industry as well as monetary policy.  In recent years, he has focused on banking problems, the US housing and housing finance crises, the entire US financial system, and the resolution of the Fannie Mae and Freddie Mac conservatorships. More recently, he has advised clients on the implementation and consequences of the Dodd-Frank Act.  He also advocates for the enactment of a US-covered bond statute.  In addition, he is a co-inventor of the Ratchet Mortgage (patent pending). Ely first established his consulting practice in 1972.

Desmond Lachman joined AEI after serving as a managing director and chief emerging market economic strategist at Salomon Smith Barney. He previously served as deputy director in the International Monetary Fund's (IMF) Policy Development and Review Department and was active in staff formulation of IMF policies. Lachman has written extensively on the global economic crisis, the US housing market bust, the US dollar, and the strains in the euro area. At AEI, Lachman focuses on the global macroeconomy, global currency issues, and multilateral lending agencies.

John H. Makin is a former consultant to the US Department of the Treasury, the Congressional Budget Office, and the International Monetary Fund. He specializes in international finance and financial markets (stock, bonds, and currencies including the euro and the US dollar). He also researches the US economy (including monetary policy and tax and budget issues), the Japanese economy, and European economies. He is the author of numerous books and articles on financial, monetary, and fiscal policy. Makin writes AEI's monthly Economic Outlook.

Alex J. Pollock joined AEI in 2004 after 35 years in banking. He was president and CEO of the Federal Home Loan Bank of Chicago from 1991 to 2004. He is the author of numerous articles on financial systems and the organizer of the Deflating Bubble series of AEI conferences. In 2007, he developed a one-page mortgage form to help borrowers understand their mortgage obligations. At AEI, he focuses on financial policy issues, including housing finance, government-sponsored enterprises, retirement finance, corporate governance, accounting standards, and the banking system. He is the lead director of CME Group, a director of Great Lakes Higher Education Corporation and the International Union for Housing Finance, and chairman of the board of the Great Books Foundation.

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AEI Participants

 

Desmond
Lachman
  • Desmond Lachman joined AEI after serving as a managing director and chief emerging market economic strategist at Salomon Smith Barney. He previously served as deputy director in the International Monetary Fund's (IMF) Policy Development and Review Department and was active in staff formulation of IMF policies. Mr. Lachman has written extensively on the global economic crisis, the U.S. housing market bust, the U.S. dollar, and the strains in the euro area. At AEI, Mr. Lachman is focused on the global macroeconomy, global currency issues, and the multilateral lending agencies.
  • Phone: 202-862-5844
    Email: dlachman@aei.org
  • Assistant Info

    Name: Emma Bennett
    Phone: 202.862.5862
    Email: emma.bennett@aei.org

 

John H.
Makin
  • John H. Makin is a resident scholar at the American Enterprise Institute (AEI) where he studies the US economy, monetary policy, financial markets, corporate taxation and banking. He also studies and writes frequently about Japanese, Chinese and European economic issues.

    Makin has served as a consultant to the US Treasury Department, the Congressional Budget Office, and the International Monetary Fund. He spent twenty years on Wall Street as the chief economist, and later as a principal of Caxton Associates a trading and investment firm. Earlier, Makin taught economics at various universities including the University of Virginia. He has also been a scholar at the Bank of Japan, the Federal Reserve Bank of San Francisco, the Federal Bank of Chicago, and the National Bureau of Economic Research. A prolific writer, Makin is the author of numerous books and articles on financial, monetary, and fiscal policy. Makin also writes AEI's monthly Economic Outlook which pairs insightful research with current economic topics.

    Makin received his doctorate and master’s degree in economics from University of Chicago, and bachelor’s degree in economics from Trinity College.


    Follow John Makin on Twitter.

  • Phone: 202-862-5828
    Email: jmakin@aei.org
  • Assistant Info

    Name: Brittany Pineros
    Phone: 202-862-5926
    Email: brittany.pineros@aei.org

 

Alex J.
Pollock
  • Alex J. Pollock is a resident fellow at the American Enterprise Institute (AEI), where he studies and writes about housing finance; government-sponsored enterprises, including Fannie Mae, Freddie Mac, and the Federal Home Loan Banks; retirement finance; and banking and central banks. He also works on corporate governance and accounting standards issues.


    Pollock has had a 35-year career in banking and was president and CEO of the Federal Home Loan Bank of Chicago for more than 12 years immediately before joining AEI. A prolific writer, he has written numerous articles on financial systems and is the author of the book “Boom and Bust: Financial Cycles and Human Prosperity” (AEI Press, 2011). He has also created a one-page mortgage form to help borrowers understand their mortgage obligations.


    The lead director of CME Group, Pollock is also a director of the Great Lakes Higher Education Corporation and the chairman of the board of the Great Books Foundation. He is a past president of the International Union for Housing Finance.


    He has an M.P.A. in international relations from Princeton University, an M.A. in philosophy from the University of Chicago, and a B.A. from Williams College.


  • Phone: 202.862.7190
    Email: apollock@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: (202) 419-5212
    Email: emily.rapp@aei.org
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