Poorna Pal

Foreign banks in the United States: Entry strategies and operations

This article deals with a very significant component of the U.S. banking industry: foreign banks in the United States. Their growth in the U.S., and specifically in California, is traced, as are the foci of their business strategy. In addition, the article explores the motivation of foreign banks to enter the U.S. market. All available theories are summarized and their relevance explored. The article goes on to speculate about some factors likely to influence the growth of foreign banking in the United States.

Computing the Extent of Circumvention of Proposition 13: A Note

We analyze the own-source revenues of California state and local governments relative to the States personal income in order to examine the extent to which the growth in non-tax revenues has circumvented the reduction in taxes produced by Proposition 13. Our results show that, while non-tax revenues have been the favored means to circumvent Californias fiscal constitution, the circumvention has been only marginal.

The Long Term Stability of the Euro—A Critical Review

This paper deals with the stability of the euro since its inception and the structural weaknesses in the allocation of responsibility for monetary and fiscal policy in particular. Recent events reflect those weaknesses and, as a result, the survival of the euro zone in its current configuration is threatened. This paper examines the stability of the euro zone by focusing on interest rates [more specifically, the risk premia in the various troubled European Monetary Union (EMU) countries] and their determinants, and the stability of these premia which affect the price of government bonds. The conclusion is that the bond markets are quite unstable and that the instability was caused by budget profligacy. This paper looks at the entire period since the inception of the euro which covers the financial crisis of 2008 and beyond and asks whether moral hazard and the free rider problems in fiscal policy and the markets for sovereign debt have contributed to the current crisis. This includes examining the determinants of the risk premiums in the various countries making up the EMU, focussing on variables that are in the Maastricht Treaty charter such as budget deficits, cumulative debt in relation to GDP, rates of inflation, and monetary variables. The conclusion is inescapable: One cannot run a country or a union with 19 finance ministers where many have set aside the convergence criteria, and with a monetary policy that accommodates the extreme needs of some members instead of dealing decisively with serious structural problems that EU and the EMU especially, face. This paper examines the economic relationships in the troubled countries of the EMU in order to draw some lessons for policy makers.