financial reform

20 Dec 09

Threats to move overseas are empty. London is out of the picture. The French president, Nicolas Sarkozy, has said he would follow the British lead. Germany and other countries could be persuaded to impose taxes of their own. And it would make little sense for bankers to move halfway around the world to Singapore to avoid a one-off tax that would not affect future bonuses.

12 Dec 09

27 Nov 09

U.K. Challenges Bank Boards - WSJ.com

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UK financial reform

11 Nov 09

FT.com / US / Economy & Fed - Plan to end Fed supervisory role draws fire

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financial reform Dodd

Bernanke Learns Flexibility in the Debate Over Fed’s Role - NYTimes.com

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Fed challenged Bernanke Fed power financial reform one year later and the beat goes on

On one front, the Fed faces populist anger from both left-wing Democrats and right-wing Republicans about its power and secrecy. At the same time, officials are locked in brutal but arcane battles about who should oversee Wall Street and big banks as Congress tries to pass a sweeping overhaul of financial regulation.
Mindful that Democrats now control the White House and Congress, Mr. Bernanke put up virtually no opposition to President Obama’s proposal for a new consumer agency that would take over the Fed’s authority over consumer lending issues. Similarly, he avoided a bruising turf battle by agreeing that the Fed would share responsibility with other regulators to monitor systemic financial risk.
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- But Fed officials have been steely in protecting their two top priorities: the Fed’s political independence on monetary policy and the Fed’s role as undisputed overseer of financial institutions deemed “too big to fail.”
- and the Fed’s effort to prop up mortgage lending by purchasing $1.25 trillion in mortgage-related securities.
- Senator Bernie Sanders, a left-leaning independent from Vermont who sponsored a Senate version of Mr. Paul’s bill, attacked the Fed for being beholden mainly to Wall Street.
  “People are frightened,” Mr. Sanders said. “How do you explain to them that the Fed has spent $2 trillion to help many of the same banks that got us into this crisis in the first place?”

03 Nov 09

FT.com / Companies / Banks - Fed tells banks to adopt pay rules early

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Fed financial reform

The Federal Reserve told big US banks on Monday that draft pay guidelines aimed at curbing excessive risk-taking will have to be followed in this year’s round of bonus payments, even though the rules do not officially come into force until 2010.

23 Oct 09

The Consensus On Big Banks Begins To Move « The Baseline Scenario

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financial reform credit crisis legacy Johnson cap v cap one year later

In contrast, in an interview reported in the NYT this morning, Paul Volcker argues that attempts to regulate these banks will fail:

“The only viable solution, in the Volcker view, is to break up the giants. JPMorgan Chase would have to give up the trading operations acquired from Bear Stearns. Bank of America and Merrill Lynch would go back to being separate companies. Goldman Sachs could no longer be a bank holding company.”
He hits hard (implicitly) at the White House’s central idea on large banks: ”The belief that appropriate regulation can ensure that speculative activities do not result in failures is a delusion”. And he lines up very much with Paul Volcker’s views – breaking up big banks is necessary, doable, and actually essential.

Remember and repeat this Mervyn King line: ”Anyone who proposed giving government guarantees to retail depositors and other creditors, and then suggested that such funding could be used to finance highly risky and speculative activities, would be thought rather unworldly. But that is where we now are.”

Won't You Please Come to Chicago, No One Else Can Take Your Place - CEPR

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financial reform credit crisis legacy Wall Street government regressive taxation

In the meantime, in elite Washington circles people are busy making plans for a national sales tax so that the government can limit the fiscal damage caused by the bankers’ recession. A sales tax is of course very regressive since low and moderate-income people typically spend the vast majority of their income, while our banker friends will more likely to be able to save some of their income or spend it in other countries where they will not be paying this new sales tax.
A bill that would require the Fed to disclose what it did with more than $2 trillion in loans to banks and other financial institutions was originally co-sponsored by Ron Paul and Alan Grayson, one of the most conservative and one of the most progressive members of Congress.

Editorial - Oh, That Account - NYTimes.com

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financial reform off-shore accounts Congress inequality tax havens exposed

There is some good news for law-abiding taxpayers and the United State Treasury. The Obama administration is smoking wealthy tax cheats out of their offshore hiding places. More than 7,500 Americans rushed to take advantage of a voluntary disclosure program that ended last Thursday, telling the I.R.S. about offshore accounts with up to $100 million in undeclared funds.
Every year the government loses billions in tax revenues this way. And it is far past time to reintroduce some fairness — and credibility — into a system that is great at taxing the little guy but too often lets the rich, and their sophisticated financial advisers, off the hook.
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- In recent months, dozens of formerly uncooperative sanctuaries, from Singapore to Liechtenstein, have rushed to sign on to new multinational agreements on information sharing.
- Congress must do its part and swiftly pass tax-related legislation wrapped into President Obama’s 2010 budget. The new legislation would require foreign banks doing business in the United States to disclose information about accounts held by American clients and withhold taxes on all the income generated by these accounts. It would require banks to determine and disclose the ultimate ownership of accounts held by offshore shell companies, and withhold taxes from them.

Calling on Big Banks to Repay Bailout Now - NYTimes.com

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and the beat goes on paper tigers financial reform one year later Fed as arm of private banks bailout

But many of those banks would prefer to keep the money for several more years rather than raise new money and dilute their existing stockholders.
Ten big financial institutions repaid nearly $70 billion in June. But the Treasury said at least several other major financial firms were strong enough to follow suit, and they were debating whether federal bank regulators should send a signal encouraging them to do so.
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- The issue of getting banks to repay the government has political importance. The Obama administration must decide by Dec. 31 whether to extend the $700 billion financial rescue program for an additional year.
- But other big banks have almost reversed roles with the Treasury, compared with a year ago. Instead of being reluctant to take government money, as some were when the program was started last October, they are now reluctant to part with it.

Talking Business - Have Banks No Shame? - NYTimes.com

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and the beat goes on paper tigers financial reform one year later Fed as arm of private banks

“They can’t pay what they owe!” he began angrily. Then he paused, collected his thoughts and started over: “Tim Geithner saved them on terms extremely favorable to the banks. They should support all of his proposed reforms.”
Mr. Johnson continued, “What gets me is that the banks have continued to oppose consumer protection. How can they be opposed to consumer protection as defined by a man who is the most favorable Treasury secretary they have had in a generation? If he has decided that this is what they need, what moral right do they have to oppose it? It is unconscionable.”

FRB: Press Release--Federal Reserve issues proposed guidance on incentive compensation--October 22, 2009

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paper tigers financial reform and the beat goes on cap v cap one year later Fed as arm of private banks

Federal Reserve to Step Up Reviews of Bank Compensation - NYTimes.com

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paper tigers financial reform and the beat goes on cap v cap one year later

A day after the Obama administration clamped down on executive pay at companies that received federal bailouts, the Federal Reserve acted more broadly Thursday to curb pay packages that encouraged bankers and other executives to take the kinds of reckless risks that contributed to the housing bubble.
Describing how he had come to set pay for the 25 top earners at the seven companies, Kenneth R. Feinberg, the overseer of compensation issues at the Treasury, said that all of the companies had made unacceptable requests for higher pay. In most instances, he restricted the cash portion of salaries to a maximum of $500,000 and imposed new restraints on the stock grants and bonuses that tied their value to company performance over several years.
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- Still, bowing to concerns that too heavy a Washington hand could lead to a mass exodus of executives, both the Treasury and Federal Reserve policies had their limits. Mr. Feinberg said he had made one significant exception to his policy of slashing compensation — for three senior executives at A.I.G. who had signed contracts for multimillion-dollar bonuses long before his appointment. Still, if Citigroup and Bank of America manage to heal, 22 of the top 34 earners could each wind up making more than $5 million over the next year.
- The principles proposed by the Fed are not as strict as suggestions from some European leaders and members of Congress. They do not impose caps on pay or prohibit multimillion-dollar pay packages, but are intended to discourage incentives that encourage excessively risky business practices.
- The Fed’s plan, which will take effect some time after a 30-day comment period, will create a two-tier system of supervising pay, using different approaches for the nation’s 28 biggest bank holding companies on the one hand, and the thousands of smaller banks on the other.
- The plan would apply to senior executives as well as to employees like traders, and groups of employees like loan officers, whose individual or collective decisions could expose the firm to significant losses.
- But the review of the compensation practices, including discussions between regulators and the companies over pay issues, would remain confidential, making it difficult for outsiders to glean any disagreements or changes in pay practices prompted by regulators.

22 Oct 09

Treasury minister Timms will attend international Tobin tax summit | Business | guardian.co.uk

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Tobin tax financial reform

It's payback time for our bailed-out bankers | Will Hutton | Comment is free | guardian.co.uk

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Governor BoE financial reform UK

21 Oct 09

FT.com / Columnists / Martin Wolf - How to manage the gigantic financial cuckoo in our nest

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Wolf financial reform and the beat goes on cap v cap capital metastasis one year later chutzpah

According to the IMF’s World Economic Outlook, the outlay of advanced economies on capital injections, asset purchases, guarantees and liquidity provision amounts to 30 per cent of gross domestic product.
All this is quite unconvincing.
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- According to the IMF, writedowns on UK bank assets are going to be $604bn, against $814bn for the eurozone and $1,025bn for the US. Yet the US economy is roughly six times as large as the UK’s.
- Again, the argument that the banks will be unable to raise capital if returns are depressed reverses the logic: the only reason banks have to raise so much capital is that they took on too much risk in pursuit of unsustainably high returns. Yes, credit is likely to become more expensive, with higher capital requirements. But credit supply was excessive and needs to be curbed.
- In a market economy, the taking of risk is disciplined by bankruptcy, not underpinned by taxpayers.
- Today, as a result, neither market discipline nor regulation is effective. There is a danger, therefore, that this rescue will lead to still greater risk-taking and an even worse crisis at some point in the not too distant future.
  Either we impose a credible threat of bankruptcy, or institutions we have to support are made safer, or, better, we have both of these. Open-ended insurance of weakly regulated institutions that take complex gambles is intolerable. We dare not return to business as usual. It is as simple – and brutal – as that.

FT.com / UK / Economy & Trade - King calls for break-up of banks

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Governor BoE financial reform UK

Mervyn King, governor of the Bank of England, called on Tuesday night for banks to be split into separate utility companies and risky ventures, saying it was “a delusion” to think tougher regulation would prevent future financial crises.
The Treasury and the Financial Services Authority have specifically rejected the idea of spliting up the banks, while the Conservatives think action in Britain alone along these lines would not be feasible.
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- Mr King borrowed Churchillian language in a speech in Edinburgh to highlight the burden banks had placed on taxpayers. “Never in the field of financial endeavour has so much money been owed by so few to so many. And, one might add, so far with little real reform.”
- The forcefulness of Mr’s King’s language reflects his belief that the structure of the banks needs to be put firmly on the international regulatory agenda, where focus has been on strengthening capital and regulating bankers’ pay.
- The Bank governor wants to see the utility aspects of banking – payment systems and deposit taking – hived off from more speculative ventures such as proprietary trading. “There are those who claim that such proposals are impractical. It is hard to see why,” he said.
- ”The belief that appropriate regulation can ensure that speculative activities do not result in failures is a delusion”.
- Instead, it believes that the proposal for banks to arrange in advance for their orderly death with so-called “living wills” would provide effective separation in a future crisis.

19 Oct 09

Big Is Bad Again - Economix Blog - NYTimes.com

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economix Johnson and the beat goes on one year later 1930s redux financial reform Brandeis

But Brandeis was right on the politics of size and what that meant in turn for the American economy — and he is very much in tune with the cutting edge of modern economics. When large companies can 1) shape their regulatory environment, 2) take advantage of lax regulation to take on more risk than they can manage, and 3) “put” the downside losses onto the taxpayer, we should be very afraid.
This exact problem has repeatedly slapped us in the face over the past 12 months with almost every development in the financial sector, and it remains inherent in every “too big to fail” bank. Brandeis was exactly right on the dangers that could arise from the financial system — even though he could not foresee how the creation of the Federal Reserve would, when combined with weak regulation, lead to even worse outcomes.
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- But the complete breakdown of financial regulation under great political pressure in the 1980s and 1990s should serve as a wake-up call, both with regard to banking and much more broadly.

W21st NYC's Library tagged "financial reform" → View Popular

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U.K. Challenges Bank Boards - WSJ.com

FT.com / US / Economy & Fed - Plan to end Fed supervisory role draws fire

Bernanke Learns Flexibility in the Debate Over Fed’s Role - NYTimes.com

FT.com / Companies / Banks - Fed tells banks to adopt pay rules early

The Consensus On Big Banks Begins To Move « The Baseline Scenario

Won't You Please Come to Chicago, No One Else Can Take Your Place - CEPR

Editorial - Oh, That Account - NYTimes.com

Calling on Big Banks to Repay Bailout Now - NYTimes.com

Talking Business - Have Banks No Shame? - NYTimes.com

FRB: Press Release--Federal Reserve issues proposed guidance on incentive compensation--October 22, 2009

Federal Reserve to Step Up Reviews of Bank Compensation - NYTimes.com

Treasury minister Timms will attend international Tobin tax summit | Business | guardian.co.uk

It's payback time for our bailed-out bankers | Will Hutton | Comment is free | guardian.co.uk

FT.com / Columnists / Martin Wolf - How to manage the gigantic financial cuckoo in our nest

FT.com / UK / Economy & Trade - King calls for break-up of banks

Big Is Bad Again - Economix Blog - NYTimes.com

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