Mispriced credit has been a major cause, if not the primary cause, of economic calamities in recent centuries. These calamities (depressions, runaway inflations, persistent high unemployment, etc.) in turn have caused wars, poverty, hunger, and other avoidable human misfortune. Mispriced credit is primarily caused by government interference in the financial marketplace. While financial markets periodically err, those markets correct for their errors much more quickly than the political marketplace corrects for erroneous policies it has inflicted on financial markets.

Government policies which cause mispriced credit include: interest rate controls, interest rate signalling by central banks, structural barriers and restrictions on private-sector financial institutions, government ownership and sponsorship of financial institutions, government support of failing financial institutions, subsidized credit for politically favored classes of borrowers, taxes that distort capital allocation, fixed foreign exchange rates, and gold standards and the like that attempt to fix the domestic value of a country's unit of account.

Ely & Company's mission is to work with clients and others in eliminating government policies which cause mispriced credit.

What's New

Letter to Farm Credit Watch Re [Ely document 384]

Readers of Bert Ely's Farm Credit Watch were advised that in light of the terrible events on September 11, 2001, the September issue of the Farm Credit Watch would not be published. Instead, readers are asked to contribute to the American Bankers Association's Victims and Families Relief Fund. The Farm Credit Watch will return in October.

September 11, 2001, testimony< [Ely document 379]

Oral statement and written testimony Bert Ely filed with the Senate Banking Committee prior to his scheduled oral testimony on Tuesday, September 11, 2001, to the committee regarding the Superior Bank failure, which occurred on July 27, 2001. Chairman Paul Sarbanes convened the hearing shortly after 10:00 a.m., but 15 minutes later recessed the hearing so that the Dirksen Senate Office building in which the hearing was being held could be evacuated in the aftermath of the terrorist attacks that mornning in New York and Washington. Chairman Sarbanes indicated that the hearing would be rescheduled.

Letter warning OTS about Super [Ely document 359]

On February 9, 2001, Bert Ely sent Ellen Seidman, the Director of the federal Office of Thrift Supervision, a letter warning her that Superior Bank, headquartered in a Chicago suburb, most likely was "deeply insolvent." Director Seidman never responded to this letter. On July 27, 2001, the OTS closed Superior. The gross insolvency loss in Superior may be as much as $1 billion, more than 50% of its assets on March 31, 2001 (see Ely Document 357). This letter also is appended to Bert Ely's Senate Banking Committee testimony on September 11, 2001, on the Superior failure (Document 379).

Updating ''Nationalizing Mortg [Ely document 296]

This short paper, released at a June 4, 2001, news conference updates Nationalizing Mortgage Risk: The Growth of Fannie Mae and Freddie Mac (see Document No. 295), which was published by AEI in March 2000. A transcript of the June 4 news conference can be found at http://www.aei.org/past_event/conf010604d.htm; the slide presentation at the news conference can be found at http://www.aei.org/past_event/conf010604b.pdf.

Farm Credit Watch -- August 20 [Ely document 351]

Headlines: The Ag Census And FCA's National Charters Proposal; What Is Going On Here