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HenryTo
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 Posted: Tue Apr 15, 2008 11:14 am Post subject: |
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A good profile of Robert Steel and his current role as under secretary of the Treasury for domestic finance:
http://www.nytimes.com/2008/04/15/business/15steel.html?_r=1&ref=business&oref=slogin
| Quote: | It will have the license to go everywhere: private equity funds, investment banks, hedge funds,” Mr. Steel, the under secretary of the Treasury for domestic finance, said in an interview last week.
By his words and demeanor, Mr. Steel could be mistaken for a midlevel policy wonk — someone hoping to let a little sunlight disinfect the dark corners of the financial world.
In fact, he is a former vice chairman at Goldman Sachs, the big investment bank. And in the last two years, Mr. Steel has been co-chairman of one commission that claimed heavy-handed regulation was stanching financial innovation and another that argued that hedge funds could police themselves.
His apparent conversion to the merits of regulation illustrates how the laissez-faire bones of the Bush administration have been rattled by the government-brokered rescue of Bear Stearns and the trauma of the credit crisis.
The new industry watchdog that Mr. Steel is trumpeting is the cornerstone of Treasury Secretary Henry M. Paulson Jr.’s controversial effort to revamp the regulatory apparatus of the nation’s financial system. |
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rffrydr
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| Posted: Mon Apr 14, 2008 10:15 am Post subject: |
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No mention of the great bank consolidation of the last 20 years: there is one looming problem JPM dare not mention, that of size. Elephants and Black Swans should not keep company.
The question is: on global scale what is too large anymore? Maybe it's just the concept, "global," that's too big.
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HenryTo
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| Posted: Mon Apr 14, 2008 10:08 am Post subject: |
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JP Morgan on the ramifications of the current financial crisis:
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Crisis to affect markets for a decade: JP Morgan
Monday April 14, 10:48 am ET
By Richard Barley
LONDON (Reuters) - The financial crisis will affect market structure and pricing for at least a decade and lead to greater regulatory powers for central banks in areas at the centre of the turmoil, analysts at JP Morgan said.
"Market participants and regulators will focus intensely on controlling the risks that were at the core of the crisis," analysts led by Jan Loeys and Margaret Cannella wrote in a note on Monday.
These risks include lending standards in mortgages, leverage in the funding of securitized products, and the use of short-term financing for illiquid long-term assets outside of the regulated banking sector.
This will change behavior for market participants "for at least a decade," they wrote, in line with fallout from previous crises.
"We had the NASDAQ, we had LTCM, we had the various forms of emerging-market crises in the '90s, we had the real estate crisis of 20 years ago: In most of these the direct impact on the behavior of the parties involved lasted more than 10 years," Loeys told Reuters in a telephone interview. "It looks like it takes a generation for the memory to fade and for the same mistakes to be made again."
He noted, for instance, that global equity markets remained extremely cheap on all risk measures even five to six years after the end of the dotcom crash.
As a result of these changes in behavior, banks will become "bigger, safer and somewhat less profitable" as they will retain more assets on balance sheet, the analysts wrote.
Securitization will be reduced, and no longer rely on short-term funding structures that assumed liquidity as a given, although it will survive, they said.
Meanwhile, premia for term, liquidity and credit risk will be higher on average over the next cycle, they said.
JP Morgan (NYSE:JPM - News) is regarded as having steered a relatively steady course through the credit crisis, turning a profit last year where others posted huge losses. It took centre stage in March as it announced a deal to buy Bear Stearns (NYSE:BSC - News), averting a collapse that could have set off fresh turmoil in already battered financial markets.
CENTRAL BANKS AS REGULATORS
The biggest change as a result of the crisis will be in regulation, Loeys said, with the focus on the off-balance sheet structures that the financial world has created.
"This looks like a recession caused by financial markets, which clearly policy makers are not going to take kindly to ... There will be a lot of follow-up," Loeys said.
"This was a run on the securitized world. The bank regulation and the structure of the supervisory system was created for a banking world of taking deposits and making loans. That world has moved towards capital markets, which were regulated from the point of view of consumer protection, but not from a systemic stability point of view," he said.
"Banks did not have the tools to try to protect the capital market from its own excesses."
As a result, central banks will be forced to take on more power as they are the entities extending support to the markets, Loeys said.
"Central banks' extension of liquidity to broker-dealers and (the) securitized world is permanent, and will be followed by regulatory control," the analysts wrote. |
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rffrydr
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| Posted: Fri Apr 11, 2008 9:04 pm Post subject: |
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This guy created the much vaunted British finanicial authority and speaks the language of a reformer: Howard Davies, director of the London School of Economics & Political Science, talks with Bloomberg's Tom Keene from London about U.S. Treasury Secretary Henry Paulson's proposal to overhaul regulatory policies of the financial markets, the global oversight of securities exchanges and the outlook for economic reform.
http://media.bloomberg.com/bb/avfile/Economics/On_Economy/vzzT5dZtWGw4.mp3
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HenryTo
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rffrydr
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rffrydr
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| Posted: Sat Apr 05, 2008 9:39 pm Post subject: |
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There was some trans-national finacial authority set up in the wake of Asian Contagion end of decade. It has been low-key advisory institution but could, and is being pressed quickly, into service. Japan--of all nations--was first to the lead here.
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HenryTo
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rffrydr
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rffrydr
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HenryTo
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| Posted: Wed Apr 02, 2008 8:50 am Post subject: |
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Bernanke on the Treasury's initial reform plans:
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Bernanke: Tsy Reg Blueprint 'Interesting, Useful' 1st Step
Apr 2, 2008 10:38:54 (ET)
WASHINGTON (Dow Jones)--Federal Reserve Chairman Ben Bernanke told lawmakers Wednesday that the Treasury Department's proposed overhaul of the U.S. financial regulatory system is an "interesting and useful" first step.
The reform proposal, unveiled this week by Treasury Secretary Henry Paulson, would boost the Fed's supervisory powers over the financial sector, including investment banks.
Bernanke, testifying before the Joint Economic Committee, said that the central bank would need adequate powers if its regulatory role increases.
The regulatory blueprint was criticized by Democrats on the committee. Sen. Charles Schumer, D-N.Y., the panel's chairman, said it is a "good foundation," but "leaves something to be desired and most importantly doesn't address the housing and economic crisis we are facing right now."
Bernanke urged Congress to act to strengthen the housing market, and said reform of government-sponsored enterprises like Fannie Mae and Freddie Mac is critical to bolstering the ailing housing sector. |
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rffrydr
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| Posted: Mon Mar 31, 2008 7:38 pm Post subject: |
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Yes, Adam Smith's old home was recently put to sale--with no mention of this star. There are no statues to him in Scotland and his grave, until a recent gift, was almost unmarked. Apparently, "Theory of Moral Sentiments" has resurrected his name among the liberal classes; and studied together with "Wealth of Nations" probably reveals more about us than him.
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emergingwave
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rffrydr
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| Posted: Mon Mar 31, 2008 2:40 pm Post subject: |
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http://www.latimes.com/news/politics/la-fi-paulson1apr01,0,3103342.story
I'm with the Madman on this:
| Quote: | Is there some reason why you never read that the Fed has done a bad job here? Do you ever read that the Fed encouraged the kind of mortgages that made this problem? Think about that as Treasury Secretary Paulson gives the Fed more power, in a deal that most likely will be rejected anyway by the people in Congress -- admittedly Democrats. Futile and wrong.
We keep hearing that individuals were stupid and can't be bailed out or that the lenders were rapacious. All of that was true. But doesn't the government deserve some blame given that the President wanted everyone to own a house and the Fed specifically backed the kinds of mortgages that are wrecking the financial world?
The new thing to blame is the leverage in the system, but need I remind people the leverage involved buying these mortgages en masse. Again, the focus is on how stupid these buyers were -- they were! -- but so what if the Fed hadn't encouraged these kinds of mortgages repeatedly we would not be looking at the wrecking of Bear (BSC - commentary - Cramer's Take) and the obvious capital destruction in the Citigroups, Washington Mutuals and the Wachovias, or the Gang of Four insurers.
I focus on all of this because what is the difference of this plan promoted by the Treasury -- which will be defeated by the Democrats, particularly the ones who have protected the commodities exchanges from the Securities and Exchange Commission -- if it would not and does not address this crisis. Giving more power to the Fed is frightening to me because it doesn't want it and it doesn't deserve to have it.
Need I remind people that the Fed had ample opportunity to get ahead of this issue by quickly cutting rates to refinance before things got out of control. Need I remind people that the Fed has had the ability to outright purchase mortgage bonds, not humiliate institutions by making them lend them to the Fed in return to cash. And it is a humiliation. There would have been no stigma to outright buying them.
Now, here is the real bottom line: I predict the Fed will spend $500 billion to bail out the system in the end because of this problem. If the Fed had acted a year ago, it would have cost nothing.
And now it gets more regulatory power.
Sorry, it is almost comical. You give the most laissez-faire institution in the country the right for more regulation and they don't believe in regulation? You give, per se, the New York Fed the oversight and that wing had all the data I know I had when I went ballistic about this last August when there was still a chance to fix things?
Thanks, Treasury. Meaningless. |
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