Category: Risk Management

NRT director on team awarded patent for fireball-dropping drones

Mary Pat Campbell

Link:https://nrt.unl.edu/nrt-director-team-awarded-patent-fireball-dropping-drones

Excerpt:

Craig Allen recently accomplished a personal first as an ecology professor by getting listed on a patent for a fireball-dropping drone.

“For me, because I expect that I will probably never have another patent in my life, because I do science that’s generally not patentable and I really don’t have the capacity for that kind of thing, the patent is fully unique and, thus, will have a special place in my heart,” said Allen, director of the National Science Foundation Research Traineeship at Nebraska.

He worked with agronomy professor Dirac Twidwell, computer science professors Sebastian Elbaum and Carrick Detweiler, and former Nebraska students Christian Laney, James Higgins and Evan Michael Beachly in developing IGNIS, the drone product.

….

At first, the three discussed using drones as a less dangerous way to sample invasive species like zebra mussels in Nebraska waters. Then, when a person was injured on an ATV during a prescribed burn, the three professors turned to discussing using drones in prescribed burns.

Allen said about 40,000 acres of rangeland in Nebraska are invaded by trees every year and fire is the best way to control that.

Typically, firefighters on ATVs or in helicopters carry out prescribed burns, but both methods can be dangerous.

Publication Date: accessed 29 Jun 2023

Publication Site: University of Nebraska-Lincoln

Fire-Bombing Drones Keep Firefighters Safe in Prescribed Burns

Mary Pat Campbell

Link: https://www.govtech.com/products/fire-bombing-drones-keep-firefighters-safe-in-prescribed-burns?utm_campaign=Newsletter%20-%20GT%20-%20GovTech%20Today&utm_medium=email&_hsmi=262543864&_hsenc=p2ANqtz-9cKiMnR5SEZ5LqjD0xlm7Y2UK9bJ3ek7riTeox-rO11Qok9nthGAZcnV5pUb69I1cdyNZPSe3oYfVk4axtFufocifCEO_-bvzdCk7Kpuz8TuK7dhw&utm_content=262544854&utm_source=hs_email

Excerpt:

Prescribed burns are a proven way to reduce the impact of destructive wildfires, but they still come with risks to the firefighters who carry them out. That was the impetus behind a project from the National Science Foundation’s National Research Traineeship (NRT) program at the University of Nebraska-Lincoln (UNL) that uses a drone to drop fireballs to ignite prescribed burns, keeping firefighters out of harm’s way.

Publication Date: Jun 2023

Publication Site: govTech

Why is it so hard to buy things that work well?

Mary Pat Campbell

Link:https://danluu.com/nothing-works/

Excerpt:

It’s also true at the firm level that it often takes an unusually unreasonable firm to produce a really great product instead of just one that’s marketed as great, e.g., Volvo, the one car manufacturer that seemed to try to produce a level of structural safety beyond what could be demonstrated by IIHS tests fared so poorly as a business that it’s been forced to move upmarket and became a niche, luxury, automaker since safety isn’t something consumers are really interested in despite car accidents being a leading cause of death and a significant source of life expectancy loss. And it’s not clear that Volvo will be able to persist in being an unreasonable firm since they weren’t able to survive as an independent automaker. When Ford acquired Volvo, Ford started moving Volvos to the shared Ford C1 platform, which didn’t fare particularly well in crash tests. Since Geely has acquired Volvo, it’s too early to tell for sure if they’ll maintain Volvo’s commitment to designing for real-world crash data and not just crash data that gets reported in benchmarks. If Geely declines to continue Volvo’s commitment to structural safety, it may not be possible to buy a modern car that’s designed to be safe.

Most markets are like this, except that there was never an unreasonable firm like Volvo in the first place. On unreasonable employees, Yossi says

Who can, and sometimes does, un-rot the fish from the bottom? An insane employee. Someone who finds the forks, crashes, etc. a personal offence, and will repeatedly risk annoying management by fighting to stop these things. Especially someone who spends their own political capital, hard earned doing things management truly values, on doing work they don’t truly value – such a person can keep fighting for a long time. Some people manage to make a career out of it by persisting until management truly changes their mind and rewards them. Whatever the odds of that, the average person cannot comprehend the motivation of someone attempting such a feat.

It’s rare that people are willing to expend a significant amount of personal capital to do the right thing, whatever that means to someone, but it’s even rarer that the leadership of a firm will make that choice and spend down the firm’s capital to do the right thing.

Economists have a term for cases where information asymmetry means that buyers can’t tell the difference between good products and “lemons”, “a market for lemons”, like the car market (where the term lemons comes from), or both sides of the hiring market. In economic discourse, there’s a debate over whether cars are a market for lemons at all for a variety of reasons (lemon laws, which allow people to return bad cars, don’t appear to have changed how the market operates, very few modern cars are lemons when that’s defined as a vehicle with serious reliability problems, etc.). But looking at whether or not people occasionally buy a defective car is missing the forest for the trees. There’s maybe one car manufacturer that really seriously tries to make a structurally safe car beyond what standards bodies test (and word on the street is that they skimp on the increasingly important software testing side of things) because consumers can’t tell the difference between a more or less safe car beyond the level a few standards bodies test to. That’s a market for lemons, as is nearly every other consumer and B2B market.

Author(s): Dan Luu

Publication Date: March 2022, accessed 7 Jun 2023

Publication Site: Dan Luu

Speed Limit Signs – a History of Speeding in the US

Mary Pat Campbell

Link: https://www.roadtrafficsigns.com/speed-limit-signs-history

Graphic:

Excerpt:

The debate between those demanding the freedom to travel at high speeds in an unregulated environment and others citing the need for greater security and increased regulation (e.g. signs) was common in the 20’s and 30’s. For certain communities, “too slow speeds” were also an issue. As reported in the June, 1925 Lyle Sign Post, the chairman of the Maryland State Roads Commission, John Mackall, “advises substitution of the maximum speed limit with a minimum speed limit, to speed up traffic. Mackall also suggested slow-moving vehicles be barred from main streets during peak hours”.

Many states did not require drivers licenses. As part of the author’s own family lore, there is a wonderful story of two strong-willed daughters, Lydia and Mary, traveling from their home in North Dakota to visit their father, Senator Langer, in Washington, DC. With little experience, other than on farm machinery and certainly no license, they ended up in Washington in record time. Speed limits (and the few Speed Limit Signs) were proudly ignored.

For more discussion, see the excerpt below on fixed speed limits: “Should there be Fixed Speed Limits?“. Even in the 30’s and 40’s, speed limits were not uniform. Should speed limits change, depending upon the weather conditions, road conditions and time of day (for example, during school hours)?

Publication Date: accessed 7 Jun 2023

Publication Site: RoadTrafficSigns.com

Paying more for less

Mary Pat Campbell

Link: https://allisonschrager.substack.com/p/paying-more-for-less

Excerpt:

Between the controversies at Disney, Bud Light, and Target, I think we need a return to shareholder primacy.

In 2019, many of the biggest American CEOs signed a manifesto declaring the end of shareholder primacy and embracing a new stakeholder model. With shareholder primacy, the main objective of a corporation is to maximize profits, both long- and short-term profits, because that is what boosts share prices and dividends, and shareholders like that. With the stakeholder model, a corporation has many other objectives: worker well-being, the environment, and the good of society. That may sound nice, but often, these stakeholders have competing objectives, and choosing who gets priority is a question of values.

When Milton Friedman argued for shareholder primacy, he said that a CEO should not forgo profits to exercise his personal values. It is not his money to spend, and not everyone shares his values, nor should they. And worse, I blame the multi-stakeholder model  for making everything feel more political.

Now, I realize even before 2019, companies were getting more political, but it got ramped up several notches in 2020. And now, everything you buy feels like a political statement. And even innocuous well-intentioned marketing campaigns that aim to give visibility to marginalized groups are taken as an explicit endorsement of a more divisive political agenda. I think shooting Bud Light cans in protest is stupid. But I get that people feel frustrated that everything is political and often not their politics.

And even if corporations mostly did pursue profits after 2019, and the stakeholder manifesto was a cynical ploy to appease young workers, get ESG capital, or avoid regulation, rhetoric matters. Before 2019, people could shrug at corporate pandering because it all seemed like a marketing ploy, and who can argue with selling lawn chairs and beer to the trans community? It is a growing demographic.

But in the context of announcing that you are doing it to make the world a better place, it strikes a different tone. And since stakeholder capitalism is about choosing between competing values, it is political. And now everything is worse for profits and society, since it adds to division and rancor.

Milton Friedman was right; shareholder primacy is better for corporations and society.

If CEOs really want to save the world, they should do the brave thing: announce an end to stakeholder capitalism and go back to just worrying about profits.

Author(s): Allison Schrager

Publication Date: 5 Jun 2023

Publication Site: Known Unknowns at substack

Statement of CFPB Director Rohit Chopra, Member, FDIC Board of Directors, on the Proposed Special Deposit Insurance Assessment on Large Banks

Mary Pat Campbell

Link: https://www.consumerfinance.gov/about-us/newsroom/statement-of-cfpb-director-rohit-chopra-member-fdic-board-of-directors-on-the-proposed-special-deposit-insurance-assessment-on-large-banks/

Graphic:

Excerpt:

First, we need to simplify our rules while strengthening them. Too many areas of regulation across our economy have become so complicated with weird formulas, dizzying methodologies, and endless loopholes and carveouts. We need simpler rules to prevent future disasters. A better alternative is to create bright line limits, with clear sanctions, including size caps and growth restrictions. Clearly observable metrics make it easier to monitor and increase consistency.

Second, we need to stop subsidizing the largest and riskiest banks by giving out free deposit insurance. When small banks fail, they rarely lead to much cost to the FDIC’s Deposit Insurance Fund, since they can be fairly easily wound down or sold. But when large banks fail, the costs to the Deposit Insurance Fund and broader economy can be steep. To make matters worse, those institutional clients with the biggest deposits feel they can get around insurance limits by going to the biggest banks. In other words, people perceive that the biggest banks get free deposit insurance over the legal limits by way of their too-big-to-fail status.

Fixing our deposit insurance pricing structure is just one small step that could help address this problem. Large, riskier banks should pay more and small, simpler banks should pay less. We should also make the framework countercyclical, so that we aren’t in the position of raising rates when banking conditions are weak.

While today’s proposed special assessment will not fall on small, local banks, the failure of First Republic Bank will be a direct hit to the Deposit Insurance Fund that is not being recouped through this special assessment. It’s a reminder that we need to fix the fund’s pricing over the long term.

Finally, as Swiss policymakers made clear regarding the recent turmoil involving Credit Suisse, more people are saying the quiet part out loud: the current resolution plans filed by the largest financial institutions in the world, which purport to show how the firms could fail without a government bailout or economic chaos, are essentially a fairy tale.5

The latest failures are another reminder that we must work to eliminate the unfair advantages bestowed upon too-big-to-fail banks. New laws and old laws alike provide a roadmap to end too-big-to-fail and the resulting risks to financial stability, fair competition, and the rule of law.6

Author(s): Rohit Chopra

Publication Date: 11 May 2023

Publication Site: Consumer Finance Protection Bureau

Federal Financial Watchdog Aims to Expand Its Reach

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2023/04/24/federal-financial-watchdog-aims-to-expand-its-reach/

Excerpt:

The Financial Stability Oversight Council — the federal agency in charge of keeping the U.S. financial system upright — wants to change a 2019 document that limits how it tries to keep problems at life insurers, money market funds, cryptocurrency firms and other nonbank financial companies from destroying the economy.

FSOC announced Friday that it’s proposing a new version of the document that would free it from the 2019 restrictions.

….

FSOC started a fight with life insurers and their regulators by designating companies such as MetLife and Prudential Financial as “systemically important financial institutions,” or companies needing extra oversight.

Life insurers argued that the SIFI designation process was unclear, arbitrary and unfair.

MetLife sued FSOC over its SIFI designation. A federal appeals court threw out MetLife’s designation in 2018.

FSOC withdrew the last designation of a nonbank company — Prudential Financial — in October 2018.

…..

FSOC says it needs more flexibility to address potential risks as early and as quickly as possible, and that comparing the potential benefits of focusing attention on a nonbank company to the potential impact on the company is not useful.

“This is in part because it is not feasible to estimate with any certainty the likelihood, magnitude or timing of a future financial crisis,” FSOC said. FSOC argued that, if it does prevent a financial crisis, it would save the country trillions of dollars.

FSOC noted that it consults with state regulators and federal regulatory agencies regularly, and that its own members are made up mostly of state and federal agency heads.

“The council expects that most potential risks to financial stability will continue to be addressed by existing regulators rather than by use of the council’s nonbank financial company designation authority,” FSOC said.

Author(s): Allison Bell

Publication Date: 24 Apr 2023

Publication Site: Think Advisor

Managing Interest Rate Risk: ALM, Franchise Value, and Strategy

Mary Pat Campbell

Link: https://www.casact.org/sites/default/files/2021-03/9_Panning.pdf

Graphic:

Excerpt:

Fortunately, there is a solution to the dilemma just posed. It
consists in adopting a pricing strategy that substantially alters the
sensitivity of a firm’s total economic value to changes in interest
rates. In the example give earlier, where
a = 15% and
b = 0, the
duration of the firm’s franchise value and total economic value are
17.62 and 6.70, respectively. But suppose we alter the firm’s
pricing policy by changing these parameters to
a = 10% and
b = 1.
In this case the target return on surplus remains at 15% (given that
the risk-free yield remains at 5%), but the durations change from
17.62 to 7.62 for franchise value, and from 6.70 to 3.27 for total
economic value. The key insight here is that a firm’s pricing
strategy can significantly affect the duration of its franchise
value and, consequently, the duration of its total economic
value.

This insight suggests a more systematic approach to managing the
duration of total economic value: find a combination of the
strategy parameters
a and
b such that the return on surplus and the
duration of total economic value are both acceptable. This can be done either by systematic numerical search or by constrained optimization procedures. For example, if the firm in our example
wanted a target return on equity of 15% but a total economic value with a duration of zero, it should implement a pricing strategy with the parameters
a = 6.2% and
b = 1.763 to achieve
those objectives. The consequences of this and the two previously
mentioned pricing strategies are shown in Figure 3 for the three
different pricing strategies just described.

Author(s): William H. Panning

Publication Date: 2006

Publication Site: Casualty Actuarial Society (for exams)

Physical interventions to interrupt or reduce the spread of respiratory viruses

Mary Pat Campbell

Link: https://www.cochranelibrary.com/cdsr/doi/10.1002/14651858.CD006207.pub6/full

https://doi.org/10.1002/14651858.CD006207.pub6

Graphic:

Excerpt:

Background

Viral epidemics or pandemics of acute respiratory infections (ARIs) pose a global threat. Examples are influenza (H1N1) caused by the H1N1pdm09 virus in 2009, severe acute respiratory syndrome (SARS) in 2003, and coronavirus disease 2019 (COVID‐19) caused by SARS‐CoV‐2 in 2019. Antiviral drugs and vaccines may be insufficient to prevent their spread. This is an update of a Cochrane Review last published in 2020. We include results from studies from the current COVID‐19 pandemic.

Objectives

To assess the effectiveness of physical interventions to interrupt or reduce the spread of acute respiratory viruses.

Search methods

We searched CENTRAL, PubMed, Embase, CINAHL, and two trials registers in October 2022, with backwards and forwards citation analysis on the new studies.

Selection criteria

We included randomised controlled trials (RCTs) and cluster‐RCTs investigating physical interventions (screening at entry ports, isolation, quarantine, physical distancing, personal protection, hand hygiene, face masks, glasses, and gargling) to prevent respiratory virus transmission. 

Data collection and analysis

We used standard Cochrane methodological procedures.

Main results

We included 11 new RCTs and cluster‐RCTs (610,872 participants) in this update, bringing the total number of RCTs to 78. Six of the new trials were conducted during the COVID‐19 pandemic; two from Mexico, and one each from Denmark, Bangladesh, England, and Norway. We identified four ongoing studies, of which one is completed, but unreported, evaluating masks concurrent with the COVID‐19 pandemic.

Many studies were conducted during non‐epidemic influenza periods. Several were conducted during the 2009 H1N1 influenza pandemic, and others in epidemic influenza seasons up to 2016. Therefore, many studies were conducted in the context of lower respiratory viral circulation and transmission compared to COVID‐19. The included studies were conducted in heterogeneous settings, ranging from suburban schools to hospital wards in high‐income countries; crowded inner city settings in low‐income countries; and an immigrant neighbourhood in a high‐income country. Adherence with interventions was low in many studies.

The risk of bias for the RCTs and cluster‐RCTs was mostly high or unclear.

Medical/surgical masks compared to no masks

We included 12 trials (10 cluster‐RCTs) comparing medical/surgical masks versus no masks to prevent the spread of viral respiratory illness (two trials with healthcare workers and 10 in the community). Wearing masks in the community probably makes little or no difference to the outcome of influenza‐like illness (ILI)/COVID‐19 like illness compared to not wearing masks (risk ratio (RR) 0.95, 95% confidence interval (CI) 0.84 to 1.09; 9 trials, 276,917 participants; moderate‐certainty evidence. Wearing masks in the community probably makes little or no difference to the outcome of laboratory‐confirmed influenza/SARS‐CoV‐2 compared to not wearing masks (RR 1.01, 95% CI 0.72 to 1.42; 6 trials, 13,919 participants; moderate‐certainty evidence). Harms were rarely measured and poorly reported (very low‐certainty evidence).

N95/P2 respirators compared to medical/surgical masks

We pooled trials comparing N95/P2 respirators with medical/surgical masks (four in healthcare settings and one in a household setting). We are very uncertain on the effects of N95/P2 respirators compared with medical/surgical masks on the outcome of clinical respiratory illness (RR 0.70, 95% CI 0.45 to 1.10; 3 trials, 7779 participants; very low‐certainty evidence). N95/P2 respirators compared with medical/surgical masks may be effective for ILI (RR 0.82, 95% CI 0.66 to 1.03; 5 trials, 8407 participants; low‐certainty evidence). Evidence is limited by imprecision and heterogeneity for these subjective outcomes. The use of a N95/P2 respirators compared to medical/surgical masks probably makes little or no difference for the objective and more precise outcome of laboratory‐confirmed influenza infection (RR 1.10, 95% CI 0.90 to 1.34; 5 trials, 8407 participants; moderate‐certainty evidence). Restricting pooling to healthcare workers made no difference to the overall findings. Harms were poorly measured and reported, but discomfort wearing medical/surgical masks or N95/P2 respirators was mentioned in several studies (very low‐certainty evidence). 

One previously reported ongoing RCT has now been published and observed that medical/surgical masks were non‐inferior to N95 respirators in a large study of 1009 healthcare workers in four countries providing direct care to COVID‐19 patients. 

Hand hygiene compared to control

Nineteen trials compared hand hygiene interventions with controls with sufficient data to include in meta‐analyses. Settings included schools, childcare centres and homes. Comparing hand hygiene interventions with controls (i.e. no intervention), there was a 14% relative reduction in the number of people with ARIs in the hand hygiene group (RR 0.86, 95% CI 0.81 to 0.90; 9 trials, 52,105 participants; moderate‐certainty evidence), suggesting a probable benefit. In absolute terms this benefit would result in a reduction from 380 events per 1000 people to 327 per 1000 people (95% CI 308 to 342). When considering the more strictly defined outcomes of ILI and laboratory‐confirmed influenza, the estimates of effect for ILI (RR 0.94, 95% CI 0.81 to 1.09; 11 trials, 34,503 participants; low‐certainty evidence), and laboratory‐confirmed influenza (RR 0.91, 95% CI 0.63 to 1.30; 8 trials, 8332 participants; low‐certainty evidence), suggest the intervention made little or no difference. We pooled 19 trials (71, 210 participants) for the composite outcome of ARI or ILI or influenza, with each study only contributing once and the most comprehensive outcome reported. Pooled data showed that hand hygiene may be beneficial with an 11% relative reduction of respiratory illness (RR 0.89, 95% CI 0.83 to 0.94; low‐certainty evidence), but with high heterogeneity. In absolute terms this benefit would result in a reduction from 200 events per 1000 people to 178 per 1000 people (95% CI 166 to 188). Few trials measured and reported harms (very low‐certainty evidence).

We found no RCTs on gowns and gloves, face shields, or screening at entry ports.

Authors’ conclusions

The high risk of bias in the trials, variation in outcome measurement, and relatively low adherence with the interventions during the studies hampers drawing firm conclusions. There were additional RCTs during the pandemic related to physical interventions but a relative paucity given the importance of the question of masking and its relative effectiveness and the concomitant measures of mask adherence which would be highly relevant to the measurement of effectiveness, especially in the elderly and in young children.

There is uncertainty about the effects of face masks. The low to moderate certainty of evidence means our confidence in the effect estimate is limited, and that the true effect may be different from the observed estimate of the effect. The pooled results of RCTs did not show a clear reduction in respiratory viral infection with the use of medical/surgical masks. There were no clear differences between the use of medical/surgical masks compared with N95/P2 respirators in healthcare workers when used in routine care to reduce respiratory viral infection. Hand hygiene is likely to modestly reduce the burden of respiratory illness, and although this effect was also present when ILI and laboratory‐confirmed influenza were analysed separately, it was not found to be a significant difference for the latter two outcomes. Harms associated with physical interventions were under‐investigated.

There is a need for large, well‐designed RCTs addressing the effectiveness of many of these interventions in multiple settings and populations, as well as the impact of adherence on effectiveness, especially in those most at risk of ARIs. 

Author(s): Tom Jefferson, Liz Dooley, Eliana Ferroni, Lubna A Al-Ansary, Mieke L van Driel, Ghada A Bawazeer, Mark A Jones, Tammy C Hoffmann, Justin Clark, Elaine M Beller, Paul P Glasziou, John M Conly

Publication Date: 30 Jan 2023

Publication Site: Cochrane Library

Investing Novices Are Calling the Shots for $4 Trillion at US Pensions

Mary Pat Campbell

Link: https://www.bloomberg.com/news/features/2023-01-04/us-public-pension-plans-run-by-investing-novices-are-on-the-edge-of-a-crisis?cmpid%3D=socialflow-twitter-economics&utm_campaign=socialflow-organic&utm_medium=social&utm_source=twitter&utm_content=economics

Graphic:

Excerpt:

In the US, a lineup of unpaid union-backed reps, retirees and political appointees are the vanguards of a $4 trillion slice of the economy that looks after the nation’s retired public servants. They’re proving to be no match for a system that’s exploded in size and complexity.

The disparity is dragging on state and local finances and — together with headwinds that include a growing ratio of retirees to workers and lenient accounting standards — gobbling up an increasing share of government budgets. Precisely how much it’s costing Americans is hard to say. But a Bloomberg News analysis of data from CEM Benchmarking, which tracks industry performance, indicates that the price tag over the past decade could run into the hundreds of billions of dollars.

….

The disconnect was on display at a 2021 investment committee meeting of the California Public Employees’ Retirement System, which provides benefits to more than 750,000 individuals. An external adviser warned board members that the boom in blank-check companies was a sign of froth in financial markets.

“I had never heard of those,” chairwoman Theresa Taylor told her fellow directors of the then-sizzling products known as SPACs, according to a transcript of the meeting.

….

Systems are underfunded partly because public officials face greater pressure to fulfill today’s demands than to fund obligations 20 or 30 years away. And because hikes in taxes and contributions are unpopular, there’s an incentive to downplay the problem.

Instead, plans are investing in higher risk assets, which make up about one-third of holdings, according to data from Preqin. That allocation has more than doubled since just before the 2008 financial crisis as plans have poured $1 trillion into alternatives.

….

Many pension advisers make smart recommendations: the guidance that CalPERS should stay away from SPACs, for one, was proven sound once regulators ramped up scrutiny of that market, which has all but ground to a halt. Yet it remains unclear how closely individual directors evaluate investments that get put in front of them.

“I served with one director for about 15 years and never saw him ask a question” about his system’s investments, said Herb Meiberger, a finance professor who sat on the board of the $36 billion San Francisco Employees’ Retirement System until 2017. A spokesman for the system said it takes governance and fiduciary duty very seriously, and that board members receive training to help them execute their duties.

Harvard finance professor Emil Siriwardane has researched why some US plans have put more money into alternatives. It wasn’t the worst-funded or those with the most aggressive performance targets. “By a factor of eight-to-ten,” the closest correlation is the investment consultants that pension plans hire, Siriwardane found.

….

Canada’s detour from the American-style model began in the late 1980s, when Ontario’s government and teacher federation decided to reboot a plan that was invested in non-marketable provincial bonds. They set up the Ontario Teachers’ Pension Plan in 1990, concluding the province could save $1.2 billion over a decade by operating more like a business.

Ontario Teachers’ first board chairman was a former Bank of Canada governor and its first finance chief was a corporate finance veteran. It soon began investing directly in private markets and infrastructure, opened offices in Europe and Asia and acquired a large real estate firm. The system pays its board members close to what corporate directors make, and manages 80% of its investments internally. Those practices have put it on a solid financial base: Ontario Teachers’ says it’s been fully funded for the past nine years, with a current funding ratio of 107%.

Until the 2008 financial crisis, boards in the Netherlands — where traditional public sector pensions are common — looked a lot like those in the US. Then the country’s central bank was given authority to assess candidates. It looked at directors’ combined risk management, actuarial and other expertise.

Many smaller Dutch funds didn’t make the cut. The regulatory hurdles helped set off a wave of mergers that, over the past decade, has reduced the number of plans by over two-thirds. The system has sprouted professional directors who serve more than one at a time. 

Few US boards are following suit. Only 19 of 113 funds studied made changes to their board composition from 1990 to 2012, a paper published in The Review of Financial Studies in 2017 found.

 “A lot of funds in the US like the idea of transforming, want to transform, but don’t have the political fortitude to do it,” said Brad Kelly of Global Governance Advisors, a Toronto-based firm that works with US and Canadian pension funds.

Author(s): Neil Weinberg

Publication Date: 3 Jan 2023

Publication Site: Bloomberg

The Currency Swaps Time Bomb in Global Finance – Rob Johnson

Mary Pat Campbell

Link: https://www.nakedcapitalism.com/2023/01/the-currency-swaps-time-bomb-in-global-finance-rob-johnson.html

Excerpt:

Yves here. While this post gives an introduction to the problem of the magnitude of currency swaps, I suspect readers will find it a bit frustrating because it raises more questions than it answers. I feel I should provide far more than I do in this intro, but it is a big topic to address properly, so I hope to keep chipping away at it over time.

Some initial observations:

First, the size of the dollar-related swaps market belies the idea that the dollar is going to be displaced all that soon.

Second, and not to sound Pollyannish, but there was a lot of currency volatility last year, yet nothing blew up. That may be due to dumb luck. But also recall that the Bank of International Settlements has been a Cassandra. It first flagged rapidly rising housing prices and related increases in lending as a risk…in 2003.

Third, interviewer Paul Jay keeps pushing on the idea that shouldn’t this activity be regulated? Wellie, it never has been and I don’t see how you can put that genie in the bottle. Foreign exchange trading has always been over the counter.

And non-US banks are regulated not by the US but by their home country under what is called the “home host” practice. So it is France’s job to see that French banks fly right, even when they are trading dollars and other non-Eurozone currencies. If a French bank gets in trouble, even on its dollar exposures, it is France that has to bail them out or put it down. That is why, during the financial crisis, when French and even much more so German banks bought a lot of bad US subprime debt and CDOs and then had a lot of losses, they needed dollar funding to cover the holes in their dollar book (as in no one would provide them with short-term dollar funding to keep funding these dollar assets and no one would buy them at any reasonable price if they had tried to sell them). But the ECB could only lend dollars to these Eurobanks, which would not solve this funding problem. So the Fed opened up big currency swap lines with the major central banks. These central banks then swapped to get dollars so they could provide emergency dollar funding to their banks.

Author(s): Yves Smith, Rob Johnson, Paul Jay

Publication Date: 3 Jan 2023

Publication Site: Naked Capitalism, theAnalysis.news

GE to End $2.5B Long-Term Care Insurance Reinsurance Arrangement

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2022/10/26/ge-to-end-2-5b-long-term-care-insurance-reinsurance-arrangement

Excerpt:

General Electric has agreed to end a long-term care insurance reinsurance relationship backed by $2.5 billion in assets.

The Boston-based company said Tuesday that it hopes to get the assets back by the end of the year.

….

For GE, the end of the reinsurance arrangement means that the company will face less worry about whether it can collect on reinsurance claims.

“This reduces counterparty risk,” Happe said.

GE will also have $2.5 billion in extra cash to reinvest.

Author(s): Allison Bell

Publication Date: 26 Oct 2022

Publication Site: Think Advisor