WASHINGTON, Oct 26 (Reuters) - Former Federal Reserve Chairman Alan Greenspan said on Thursday the U.S. economy was pulling past a sharp housing-sector downturn, and warned the dollar was being challenged as the world's reserve currency.

"We're beginning to see some move from the dollar to the euro, both from the private sector ... also from monetary authorities and central banks," Greenspan told a conference sponsored by the Commercial Finance Association.

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Define the Capture Theory of Regulation. Why might firms lobby for regulation if they will clearly lose at least in terms of a dead-weight loss? How does this theory apply to banking in the US, especially in the years following Glass Steagall?

I said in class that the current banking era is similar to that of the 1920s in terms of diversification. What are two important differences between today's era and that of the 1920s?

Why was Glass Steagall passed? Did it make the banking system in the US more competitive? What effect did it have on the demand curve for banking services?

What motivated Congress to pass deposit insurance legislation in the 1930s? How much was the original insurance coverage? Was the system intended to operate like an insurance program, with premiums paid by banks?

What was the McFadden Act? What factors contributed to the weakening of this Act? What role was played by holding companies?

Mark Brandly asks this morning what might have happened to the price level if the money supply was fixed in 1959 at the 1959 level.

Expansionary monetary policies drive prices up. However, if the money supply was fixed, prices would tend to fall. Any potential decrease in the price level is ignored by the CPI and by price indices in general. To estimate the total price effect of expansionary monetary policies, we must also consider the potential decrease in the price level that would have occurred in the absence of such monetary policies.

The value of money and therefore the price level is determined by the supply and demand for money. As the economy grows, the demand for money tends to increase, driving the value of money up and the price level down. Historically, when economic growth is accompanied by increases in the money supply, the inflationary effects on prices due to the monetary expansion have generally outweighed the economic growth's negative effects on prices.

The price level increases, but economic growth reduces the amount of the rise of the price level. If there was no real economic growth, then monetary policies would result in even higher prices. The total effect on the price level due to monetary policies includes the increase in the price level due to an expanding money supply and the potential decrease in the price level that would have occurred in the absence of expansionary monetary policies.

What is the appeal for Internet banking? (Answer more than in terms of "bricks and clicks".) Could banks that spend millions of dollars on an Internet presence be facing a catch-22? How? What types of asymmetric information problems do Internet banks face as opposed to "brick and mortar" banks?

What effect has Internet banking had on the industry demand curve for banking? What implications does this have for both the banking industry and for bank consumers?

Explain the US banking system before from 1787 to 1861. Why was the Hamiltonian banking system considered controversial? What type of regulatory structure were free banks subject to? What types of banks received state charters? What is dual banking?

Why was the Secret Service created? What effect on banking in the U.S. did the National Bank Act of 1863 have? What effect on banking did the Federal Reserve Act of 1913 have?

Here is an article in the most recent issue of the New Yorker on Muhammad Yunus, this years' winner of the Nobel Peace Prize, the founder of the Grameen Bank, and the microfinance movement. This is Jeff Tucker on Grameen and microcredit.

A sign of the times (or of monetary policy)? Drug dealers are increasingly choosing the euro over the dollar.

The New York Times reports today on the new "no-swipe" credit cards:

The demonstration revealed potential security and privacy holes in a new generation of credit cards — cards whose data is relayed by radio waves without need of a signature or physical swiping through a machine. Tens of millions of the cards have been issued, and equipment for their use is showing up at a growing number of locations, including CVS pharmacies, McDonald’s restaurants and many movie theaters.

The card companies have implied through their marketing that the data is encrypted to make sure that a digital eavesdropper cannot get any intelligible information. American Express has said its cards incorporate “128-bit encryption,” and J. P. Morgan Chase has said that its cards, which it calls Blink, use “the highest level of encryption allowed by the U.S. government.”

But in tests on 20 cards from Visa, MasterCard and American Express, the researchers here found that the cardholder’s name and other data was being transmitted without encryption and in plain text. They could skim and store the information from a card with a device the size of a couple of paperback books, which they cobbled together from readily available computer and radio components for $150.

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Should there be limits to consumer sovereignty in banking? Look at what one disgruntled customer did in response to a bad experience with AmSouth:

"Johnson City, Tenn., resident Rusty Doebler said he set up www.BadAmSouth.com about four months ago after the bank closed his account. The site, which includes a list of discussion forums on subjects such as overdrafts, closed accounts and bank policies, says it is "designed for the purpose of exposing the nightmares of doing business with 'The Relationship People.' "

[FULL ARTICLE HERE]

This is another example of how technology has caused banking to become more competitive in recent years. In this case, it makes it easier for consumers to express dissatisfaction with producers, something that would not have been as possible to previous generations of banking customers. Consumers should, of course, be able to say whatever they want about producers--but they can be held liable if they are dishonest and cause harm to the producer in the process. Just the same, I'd have no problem if AmSouth started a website entitled "BadRustyDoebler.com" either.

See also this article about the City of Leeds' efforts to obtain a $22.5 million line of credit (from the Jefferson County Commission) to attract a commercial and residential project. The county, which is overextended in such funding for such projects, is likely to reject the request. What would be the advantages and disadvantages if Leeds' accessed funds through the private sector? Is there significant default, credit, and interest rate risk? Which funding source would taxpayers prefer? And, how does the lack of interest on the part of the Jefferson County Commission reflect the opportunity cost of the proposed $1 billion dome project planned for downtown Birmingham?