Another Nobel Surprise for Economics


October 18, 2017

Another Nobel Surprise for Economics

by Robert J.Shiller

https://www.project-syndicate.org/commentary/richard-thaler-nobel-behavioral-economics-by-robert-j–shiller-2017-10

Image result for Economist Richard Thaler

University of Chicago Economist Richard Thaler wins 2017 Nobel Prize in Economics

Richard Thaler (pic above) has shown in his research how to focus economic inquiry more decisively on real and important problems. His research program has been both compassionate and grounded, and he has established a research trajectory for young scholars and social engineers that marks the beginning of a real and enduring scientific revolution.

 

NEW HAVEN – The winner of this year’s Nobel Memorial Prize in Economic Sciences, Richard Thaler of the University of Chicago, is a controversial choice. Thaler is known for his lifelong pursuit of behavioral economics (and its subfield, behavioral finance), which is the study of economics (and finance) from a psychological perspective. For some in the profession, the idea that psychological research should even be part of economics has generated hostility for years.

Not from me. I find it wonderful that the Nobel Foundation chose Thaler. The economics Nobel has already been awarded to a number of people who can be classified as behavioral economists, including George Akerlof, Robert Fogel, Daniel Kahneman, Elinor Ostrom, and me. With the addition of Thaler, we now account for approximately 6% of all Nobel economics prizes ever awarded.

But many in economics and finance still believe that the best way to describe human behavior is to eschew psychology and instead model human behavior as mathematical optimization by separate and relentlessly selfish individuals, subject to budget constraints. Of course, not all economists, or even a majority, are wedded to this view, as evidenced by the fact that both Thaler and I have been elected president, in successive years, of the American Economic Association, the main professional body for economists in the United States. But many of our colleagues unquestionably are.

I first met Thaler in 1982, when he was a professor at Cornell University. I was visiting Cornell briefly, and he and I took a long walk across the campus together, discovering along the way that we had similar ideas and research goals. For 25 years, starting in 1991, he and I co-organized a series of academic conferences on behavioral economics, under the auspices of the US National Bureau of Economic Research.

Image result for Economist Merton MillerMerton H. Miller–The Nobel Laureate in Economics, 1990

Over all those years, however, there has been antagonism – and even what appeared to be real animus – toward our research agenda. Thaler once told me that Merton Miller, who won the economics Nobel in 1990 (he died in 2000), would not even make eye contact when passing him in the hallway at the University of Chicago.

Miller explained his reasoning (if not his behavior) in a widely cited 1986 article called “Behavioral Rationality in Finance.” Miller conceded that sometimes people are victims of psychology, but he insisted that stories about such mistakes are “almost totally irrelevant” to finance. The concluding sentence of his review is widely quoted by his admirers: “That we abstract from all these stories in building our models is not because the stories are uninteresting but because they may be too interesting and thereby distract us from the pervasive market forces that should be our principal concern.”

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MIT Economist Stephen A. Ross

 

Stephen A. Ross of MIT, another finance theorist who was a likely future Nobel laureate until he died unexpectedly in March, argued along similar lines. In his 2005 book Neoclassical Finance, he, too, eschewed psychology, preferring to build a “methodology of finance as the implication of the absence of arbitrage.” In other words, we can learn a lot about people’s behavior just from the observation that there are no ten-dollar bills lying around on public sidewalks. However psychologically bent some people are, one can bet that they will pick up the money as soon as they spot it.

Both Miller and Ross made wonderful contributions to financial theory. But their results are not the only descriptions of economic and financial forces that should interest us, and Thaler has been a major contributor to a behavioral research program that has demonstrated this.

For example, in 1981, Thaler and Santa Clara University’s Hersh Shefrin advanced an “economic theory of self-control” that describes economic phenomena in terms of people’s inability to control their impulses. Sure, people have no trouble motivating themselves to pick up a ten-dollar bill that they might find on a sidewalk. There is no self-control issue there. But they will have trouble resisting the impulse to spend it. As a result, most people save too little for their retirement years.

Economists need to know about such mistakes that people repeatedly make. During a long subsequent career, involving work with UCLA’s Shlomo Benartzi and others, Thaler has proposed mechanisms that will, as he and Harvard Law School’s Cass Sunstein put it in their book Nudge, change the “choice architecture” of these decisions. The same people, with the same self-control problems, could be enabled to make better decisions.

Improving people’s saving behavior is not a small or insignificant matter. To some extent, it is a matter of life or death, and, more pervasively, it determines whether we achieve fulfillment and satisfaction in life.

Thaler has shown in his research how to focus economic inquiry more decisively on real and important problems. His research program has been both compassionate and grounded, and he has established a research trajectory for young scholars and social engineers that marks the beginning of a real and enduring scientific revolution. I couldn’t be more pleased for him – or for the profession.

The Demise of Dollar Diplomacy


October 17, 2017

The Demise of Dollar Diplomacy

by Barry Eichengreen*

http://www.project-syndicate.org

Pundits have been saying last rites for the dollar’s global dominance since the 1960s – that is, for more than half a century now. But the pundits may finally be right, because the greenback’s dominance has been sustained by geopolitical alliances that are now fraying badly.

WASHINGTON, DC – Mark Twain never actually said “Reports of my death have been greatly exaggerated.” But the misquote is too delicious to die a natural death of its own. And nowhere is the idea behind it more relevant than in discussions of the dollar’s international role.

Pundits have been saying last rites for the dollar’s global dominance since the 1960s – that is, for more than a half-century now. The point can be shown by occurrences of the phrase “demise of the dollar” in all English-language publications catalogued by Google.

The frequency of such mentions, adjusted for the number of printed pages per year, first jumped in 1969, following the collapse of the London Gold Pool, an arrangement in which eight central banks cooperated to support the dollar’s peg to gold. Use of the phrase soared in the 1970s, following the collapse of the Bretton Woods system, of which the dollar was the linchpin, and in response to the high inflation that accompanied the presidencies of Richard Nixon, Gerald Ford, and Jimmy Carter in the 1970s.

But even that spike was dwarfed by the increase in mentions and corresponding worries about the dollar starting in 2001, reflecting the shock of the terrorist attacks that September, the mushrooming growth of the US trade deficit, and then the global financial crisis of 2008.

Yet through all of this, the dollar’s international role has endured. As my coauthors and I show in a new book, the share of dollars in the foreign-currency reserves held by central banks and governments worldwide hardly budged in the face of these events. The greenback remains the dominant currency traded in foreign-exchange markets. It is still the unit in which petroleum is priced and traded worldwide, Venezuelan leaders’ complaints about the “tyranny of the dollar” notwithstanding.

To the consternation of many currency traders, the value of the dollar fluctuates widely, as its rise, fall, and recovery in the course of the last year have shown. But this does little to erode the attractiveness of the dollar in international markets.

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America First–Then What is Future of the US Dollar in the Trumpian Era?

Central banks still hold US Treasury bonds because the market for them is the single most liquid financial market in the world. And Treasury bonds are secure: the federal government has not fallen into arrears on its debt since the disastrous War of 1812.

In addition, US diplomatic and military links encourage America’s allies to hold dollars. States with their own nuclear weapons hold fewer dollars than countries that depend on the US for their security needs. Being in a military alliance with a reserve-currency-issuing country boosts the share of the partner’s foreign-exchange reserves held in that currency by roughly 30 percentage points. The evidence thus suggests that the share of reserves held in dollars would fall appreciably in the absence of this effect.

This under-appreciated link between geopolitical alliances and international currency choice reflects a combination of factors. Governments have reason to be confident that the reserve-currency country will make servicing debt held by its allies a high priority. In return, those allies, by holding its liabilities, can help to lower the issuer’s borrowing costs.

Here, then, and not in another imbroglio over the federal debt ceiling this coming December, is where the real threat to the dollar’s international dominance lies. As one anonymous US State Department official put it, President Donald Trump “does not seem to care about alliances and therefore does not care about diplomacy.”

South Korea and Japan are thought to hold about 80% of their international reserves in dollars. One can imagine that the financial behavior of these and other countries would change dramatically, with adverse implications for the dollar’s exchange rate and US borrowing costs, were America’s close military alliances with its allies to fray.

Nor is it hard to imagine how this fraying could come about. President Donald Trump has painted himself into a strategic corner: he needs a concession from North Korea on the nuclear-weapons issue in order to save face with his base, not to mention with the global community. And, for all of Trump’s aggressive rhetoric and posturing, the only feasible way to secure such a concession is through negotiation. Ironically, the most plausible outcome of that process is an inspections regime not unlike the one negotiated by Barack Obama’s administration with Iran.

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Visualizing the Size of the U.S. National Debt

How big is the U.S. National Debt?

The best way to understand these large numbers? We believe it is to represent them visually, by plotting the data with comparable numbers that are easier to grasp.

Today’s data visualization plots the U.S. National Debt against everything from the assets managed by the world’s largest money managers, to the annual value of gold production.

1. The U.S. national debt is larger than the 500 largest public companies in America.
The S&P 500 is a stock market index that tracks the value of the 500 largest U.S. companies by market capitalization. It includes giant companies like Apple, Exxon Mobil, Microsoft, Alphabet, Facebook, Johnson & Johnson, and many others. In summer of 2016, the value of all of these 500 companies together added to $19.1 trillion – just short of the debt total.

2. The U.S. national debt is larger than all assets managed by the world’s top seven money managers.
The world’s largest money managers – companies like Blackrock, Vanguard, or Fidelity – manage trillions of investor assets in stocks, bonds, mutual funds, ETFs, and more. However, if we take the top seven of these companies and add all of their assets under management (AUM) together, it adds up to only $18.9 trillion.

3. The U.S. national debt is 25x larger than all global oil exports in 2015.
Yes, countries such as Saudi Arabia, Kuwait, and Russia make a killing off of selling their oil around the world. However, the numbers behind these exports are paltry in comparison to the debt. For example, you’d need the Saudis to donate the next 146 years of revenue from their oil exports to fully pay down the debt.

4. The U.S. national debt is 155x larger than all gold mined globally in a year.
Gold has symbolized money and wealth for a long time – but even the world’s annual production of roughly 3,000 tonnes (96 million oz) of the yellow metal barely puts a dent in the debt total. At market prices today, you’d need to somehow mine 155 years worth of gold at today’s rate to equal the debt.

5. In fact, the national debt is larger than all of the world’s physical currency, gold, silver, and bitcoin combined.

That’s right, if you rounded up every single dollar, euro, yen, pound, yuan, and any other global physical currency note or coin in existence, it only amounts to a measly $5 trillion. Adding the world’s physical gold ($7.7 trillion), silver ($20 billion), and cryptocurrencies ($11 billion) on top of that, you get to a total of $12.73 trillion. That’s equal to about 65% of the U.S. national debt.

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To get there, Trump’s administration will have to offer something in return. The most obvious bargaining chip that could be offered to make the North Korean regime feel more secure is a reduction in US troop levels on the Korean Peninsula and in Asia in general, With that, the US security guarantee for Asia will weaken, in turn providing China an opportunity to step into the geopolitical breach.

And where China leads geopolitically, its currency, the renminbi, is likely to follow.

*Barry Eichengreen is Professor of Economics at the University of California, Berkeley, and a former senior policy adviser at the International Monetary Fund. His latest book is Hall of Mirrors:The Great Depression, the Great Recession, and the Uses – and Misuses – of History.

The Economic Case for China’s One Belt, One Road Initiative


October 14, 2017

The Economic Case for China’s One Belt, One Road Initiative

by Shang-Jin Wei*
https://www.project-syndicate.org/commentary/china-belt-and-road-economic-case-by-shang-jin-wei-2017-10

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In recent years, many of the world’s most influential countries have turned inward, with politicians promising protectionism, immigration restrictions, and even border walls. But, to achieve stronger economic growth and development, the world needs initiatives focused on building bridges – initiatives like China’s Belt and Road.

NEW YORK – Since 2013, China has been pursuing its “Belt and Road” initiative, which aims to develop physical infrastructure and policy linkages connecting more than 60 countries across Asia, Europe, and Africa. Critics worry that China may be so focused on expanding its geopolitical influence, in order to compete with the likes of the United States and Japan, that it may pursue projects that make little economic sense. But, if a few conditions are met, the economic case for the initiative is strong.

As a recent Asian Development Bank report confirms, many Belt and Road countries are in urgent need of large-scale infrastructure investment – precisely the type of investment that China has pledged. Some, such as Bangladesh and Kyrgyzstan, lack reliable electricity supplies, which is impeding the development of their manufacturing sectors and stifling their ability to export. Others, like Indonesia, do not have enough ports for internal economic integration or international trade.

 

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The Belt and Road initiative promises to help countries overcome these constraints, by providing external funding for ports, roads, schools, hospitals, and power plants and grids. In this sense, the initiative could function much like America’s post-1945 Marshall Plan, which is universally lauded for its contribution to the reconstruction and economic recovery of war-ravaged Europe.

Of course, external funding alone is not sufficient for success. Recipient countries must also undertake key reforms that increase policy transparency and predictability, thereby reducing investment risk. Indeed, implementation of complementary reforms will be a key determinant of the economic returns on Belt and Road investments.

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President Xi Jinping’s One Belt, One  Road Initiative  aims to knit together Asia, Europe and Africa through land and maritime corridors that collectively encompass a set of countries representing about 65 percent of the world’s population and one-third of its total economic output. China plans to spend roughly $150 billion a year to advance the initiative through infrastructure projects ranging from railways and roads, to ports and pipelines, to power plants and telecommunications networks.

For China, the Belt and Road investments are economically appealing, particularly when private Chinese firms take the lead in carrying them out. In 2013, when China first proposed the Belt and Road initiative, the country was sitting on $4 trillion in foreign-exchange reserves, which were earning a very low dollar return (less than 1% a year). In terms of China’s own currency, the returns were negative, given the expected appreciation of the renminbi against the US dollar at the time.

In this sense, Belt and Road investments are not particularly costly for China, particularly when their far-reaching potential benefits are taken into account. China’s trade-to-GDP ratio exceeds 40% – substantially higher than that of the US – owing partly to underdeveloped infrastructure and inadequate economic diversification among China’s trading partners. By addressing these weaknesses, China’s Belt and Road investments can lead to a substantial increase in participant countries’ and China’s own trade volumes, benefiting firms and workers substantially.

This is not to suggest that such investments are risk-free for China. The economic returns will depend on the quality of firms’ business decisions. In particular, because efficiency is not the primary consideration, Chinese state-owned enterprises (SOEs) might purse low-return projects. That is why China’s SOE-reform process must be watched carefully. Nonetheless, while the Belt and Road initiative is clearly driven partly by strategic objectives, a cost-benefit analysis shows that the economic case is also very strong – so strong, in fact, that one might ask why China didn’t undertake it sooner.

Even the United States and other countries may reap significant economic returns. A decade after the global financial crisis erupted, recovery remains weak and tentative in much of the world. Bold, large-scale infrastructure investments can provide much-needed short-run stimulus to global aggregate demand. The US, for one, is likely to see a surge in demand for its own exports, including cars, locomotives, planes, and high-end construction equipment, and financial, accounting, educational, and legal services.

In the longer term, the new infrastructure will ease logistical bottlenecks, reducing the costs of production inputs. The result will be higher productivity and faster global growth.

If Belt and Road projects are held to high environmental and social standards, significant progress can also be made on global challenges such as climate change and inequality. The more countries choose to participate in these projects, the better the chance of achieving these standards, and the greater the global social returns will be.

In an era when some of the world’s most influential countries are turning inward, talking about erecting trade barriers and constructing border walls, the world needs initiatives focused on building bridges and roads, both literal and figurative – initiatives like the Belt and Road strategy.

 

The Guardian view on the IMF’s message: Yes, tax the super-rich


October 13, 2017

The Guardian view on the IMF’s message: Yes, tax the super-rich

https://www.theguardian.com/commentisfree/2017/oct/12/the-guardian-view-on-the-imfs-message-yes-tax-the-super-rich

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The International Monetary Fund has been on quite a journey from the days when it was seen as the provisional wing of the Washington consensus, an ideology that promoted the false idea that growth was turbo-charged by scrapping welfare policies and pursuing privatisations.

These days the IMF is less likely to harp on about the joys of liberalised capital flows than it is to warn of the dangers of ever-greater inequality. The Fund’s latest – and welcome – foray into the realms of progressive economics came this week when it used its half-yearly fiscal monitor – normally a dry-as-dust publication – to make the case for higher taxes on the super-rich. Make no mistake, this is a significant moment.

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What a striking contrast–Reagan -Thatcher and May-Trump

For almost 40 years, since the arrival of Margaret Thatcher in Downing Street and Ronald Reagan in the White House, the economic orthodoxy on taxation has been that higher taxes for the 1% are self-defeating. Soaking the rich, it was said, would punish initiative and lead to lower levels of innovation, less investment, weaker growth and, therefore, reduced revenue for the state. As last week’s Conservative party conference showed, this line of argument is still popular. Minister after minister took to the stage to warn that Jeremy Corbyn’s tax plans would lead to a 1970s-style brain drain.

The IMF agrees that a return to the income tax levels seen in Britain during the 1970s would have an impact on growth. But that was when the top rate of income tax was 83%, and Mr Corbyn’s plans are far more modest. Indeed, it is a sign of how difficult it has become to have a grown-up debate about tax that Labour’s call for a 50% tax band on those earning more than £123,000 and a 45% rate for those earning more than £80,000 should be seen as confiscatory. The IMF’s analysis does something to redress the balance, making two important points.

First, it says that tax systems should have become more progressive in recent years in order to help offset growing inequality but rather have been becoming less progressive. Second, it finds no evidence for the argument that attempts to make the rich pay more tax would lead to lower growth. There is nothing especially surprising about either of the conclusions: in fact, the real surprise is that it has taken so long for the penny to drop. Growth rates have not picked up as taxes have been cut for the top 1%. On the contrary, they are much weaker than they were in the immediate postwar decades when the rich could expect to pay at least half their incomes – and often substantially more than half – to the taxman. If trickle-down theory worked, there would be a strong correlation between countries with low marginal tax rates for the rich and growth. There is no such correlation and, as the IMF rightly concludes, “there would appear to be scope for increasing the progressivity of income taxation without significantly hurting growth for countries wishing to enhance income redistribution”.

With a nod to the work of the French economist Thomas Piketty, the fiscal monitor also says countries should consider wealth taxes for the rich, to be levied on land and property. The IMF’s findings on tax provide ample and welcome political cover for Mr Corbyn and John McDonnell, the shadow chancellor, as they seek to convince voters that Labour’s tax plans are not just equitable but also economically workable.

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By contrast, the study challenges Donald Trump to rethink tax plans that would give an average tax cut of more than $200,000 a year for someone earning more than $900,000. The response from the US administration was predictable: mind your own business. The IMF is not naive. It knows it is one thing to make the case for higher taxes on the rich but another thing altogether to get governments to implement them, because better-off individuals have more political clout. The IMF has demolished the argument that what is good for the super-rich is good for the rest of us, but don’t expect the top 1% to give up without a fight.

 

The Irwan Poverty Thesis challenged


October 13, 2017

The Irwan  Poverty Thesis challenged

by Susan Loone
http://www.malaysiakini.com

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“We need to correct the perception. The truth is our economy is strong and will continue to be stronger under Najib’s leadership.”–Irwan Serigar. Then why the  budget cuts?

It is time to challenge Treasury Secretary-General Irwan Serigar Abdullah’s thesis that there are no reasons for Malaysians to be poor, economist Dr. Shankaran Nambiar said.

He stated that Irwan had given an important message when he suggested that the way out of poverty is through the night markets.

“At its core, in one interpretation, is the following unspoken text. Do not depend on the government – you cannot continue to depend on the government; you have to take responsibility for your own well being,” said Shankaran, Senior Fellow at the Malaysian Institute of Economic Research.

“This is a harsh world and you have to do battle for yourself. Use the market to your advantage, if you can.”

But alongside this message, one should note that Irwan, given his position, worked towards formulating the BR1M policy, reminded Shankaran, who hails from Penang.

“On the face of it, the man who had a hand in designing a system of targeted subsidies now turns his back on handouts. Why this sudden backflip?” asked the author of the book “Malaysia in Troubled Times”.

Shankaran (photo) was responding to Irwan’s suggestion that the way out of poverty is entrepreneurship. Irwan’s theory has been criticised by others like Penang Deputy Chief Minister II P Ramasamy who said his view was a “superficial understanding” of poverty.

Irwan had cited the example of migrants who have made good as petty traders in Chow Kit to illustrate how the disadvantaged can, through their own effort, seize the opportunities thrown by the market system.

If foreign workers with absolutely no endowments can secure reasonable income through sheer dint of hard work and entrepreneurship, why can’t Malaysians, was Irwan’s message, said Shankaran.

After years of fiscal imprudence, wasteful public investments, and an educational system that has not put Malaysia on the technological forefront, “the future of government support lies in doubt”, he added.

Shankaran said the flow of government revenues may not be what it was for some time to come, maybe for a long time to come. If the public debt cannot be contained or brought down, there will have to be a gradual tightening of government expenditure, he added.

Culture of dependency

In time to come, Shankaran said, subsidies will have to be cut (or more politely, rationed), government expenditure reduced, and taxes raised.

“Not that this scenario has not already made its entrance. Irwan, in a rather blunt and dramatic manner, possibly, wants to prod people out of the culture of dependency.

“Who, 20 years ago, would have imagined that Malaysia’s oldest university would have to take a 30 percent budget cut?” he asked.

“That is the direction in which we are heading, although there are good reasons why education and healthcare should be protected from crass commercial interests.”

Shankaran said there are fewer scholarships to study abroad, student loans are less generously given, and there are fewer vacancies in the public service sector to accommodate the ever-increasing number of graduates now.

He added that government institutions which thought that their responsibility was to solely focus on how to spend their allocations will now have to function differently.

“Public universities must now raise funds and in time, people must work on being job creators rather than job seekers. Many questions will have to be answered as we slide into the new state of affairs,” Shankaran said.

“At the limit, or as government largesse diminishes, how will ethnic considerations be traded off against need and social inclusion?” Shankaran said groups that have relied very heavily on government support will suffer from the withdrawal of support and subsidies.

“This can create discontent. How will the transition be managed? Will meritocracy, productivity and outcome-based processes ever matter? Will entrepreneurship be the favoured instrument to reduce inequality?” Shankaran also wanted to know will government support for entrepreneurship be open to all aspiring entrepreneurs or will it be restricted on the basis of selected criteria.

“Entrepreneurship is set to be the new game in town. At least, a new game for those accustomed to the culture of dependence.”

1MDB –Another Causalty — Tim Leissner–More still at Large


October 5, 2017

1MDB –Another Casualty — Tim Leissner–More  still at Large

From The Wall Street Journal

by Justin Baer

Image result for 1MDB and Najib

The Malaysian Leader behind the 1MDB Scandal (DOJ Code Name: Malaysian Official 1)

A former Goldman Sachs Group Inc. senior banker linked to alleged financial fraud involving Malaysian state fund 1Malaysia Development Bhd. was barred from the U.S. securities industry for failing to cooperate with a regulator’s investigation.

The Financial Industry Regulatory Authority, a U.S. industry body, said it issued its ban on Tim Leissner on September. 11, after the former banker didn’t respond to requests for documents and other information stemming from his departure from Goldman in early 2016.

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High Flying  Tim Leissner, formerly of Goldman Sachs, seen with  ex-wife Kimora Lee Simmons, is banned from US Securities Industry.

Mr. Leissner was suspended by Goldman and later quit the Wall Street firm after it discovered he had written an unauthorized letter vouching for Jho Low, a Malaysian businessman who is at the center of international probes alleging that billions of dollars were stolen from the state investment fund, The Wall Street Journal has reported.

“Without admitting or denying the findings, Mr. Leissner consented to the sanction and to the entry of findings,” the regulator wrote in Mr. Leissner’s file, noting that Mr. Leissner failed to provide Finra with certain requested documents and information during the course of an investigation into a reference letter that led to his departure from Goldman.

A Finra spokeswoman and a spokesman for Goldman Sachs declined to comment. Mr. Leissner’s lawyer declined to comment. Mr. Low has previously denied wrongdoing, as has 1MDB, which has said it would cooperate with the investigations.

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This Penang-born “Arab”is still at Large

U.S. Justice Department investigators are trying to determine whether Goldman had reason to suspect that money it helped 1MDB raise was misused and, if so, whether the bank was obligated to report any concerns to authorities. The Federal Reserve, the Securities and Exchange Commission and New York state’s Department of Financial Services also have undertaken examinations of some of the bank’s actions, as have Singapore authorities, the Journal reported last year, citing people familiar with the matter.

Goldman had raised $6.5 billion for the fund and earned nearly $600 million in fees, making the Malaysian client among its most lucrative, the Journal reported at the time. Goldman has previously said it did nothing wrong and had no way of knowing there might be fraud surrounding 1MDB.

Central to Goldman’s 1MDB dealings was Mr. Leissner, a senior investment banker and chairman of the firm’s Southeast Asia office until his departure.

In June 2015, Mr. Leissner wrote to Banque Havilland, a small Luxembourg private bank, vouching for Mr. Low, who wanted to open an account there, the Journal reported, citing people familiar with the matter. The letter said Goldman had done due diligence on Mr. Low and found no issues. Banque Havilland hasn’t responded to requests for comment.

Goldman compliance executives unearthed the document in a January 2016 email search, The Journal reported. The firm said it confronted Mr. Leissner about the letter, which violated its policies, and he resigned the next day. Later, Singapore’s Monetary Authority cited the letter in barring Mr. Leissner from doing business in the city-state for a decade.

Write to Justin Baer at justin.baer@wsj.com and Tom Wright at tom.wright@wsj.com

Also Read: https://www.bloomberg.com/news/articles/2017-10-03/ex-goldman-banker-leissner-barred-from-u-s-securities-industry