Posted on 10/23/2011 5:54:24 AM PDT by MontaniSemperLiberi
That’s why a recent speech by Paul A. Volcker, the former chairman of the Federal Reserve and a voice of reason on matters financial, is so timely and important. Presented last month to the Group of 30, an organization devoted to international economic issues, the speech outlined crucial work that still must be done to safeguard our financial future. “Three Years Later: Unfinished Business in Financial Reform” was the title.
“By now it is pretty clear that it was faith in the techniques of modern finance, stoked in part by the apparent huge financial rewards, that enabled the extremes of leverage, the economic imbalances and the pretenses of the credit rating agencies to persist so long,” Mr. Volcker said in this remarkably candid talk.
The real treasures were found in his to-do list for further reforms. That heavy lifting includes addressing capital requirements (make them tough and enforceable), derivatives (make them more standardized and transparent) and auditors (ensure that they are truly independent by rotating them periodically).
(Excerpt) Read more at nytimes.com ...
Given the opaqueness of the contracts, it become impossible for auditors to say more than "their lawyers say it's good" and audits are worth less than the paper they are written on.
The Economy was a mess when this guy was in charge. I couldn’t get passed his name in the article.
We also need to address “too big to fail”. In this case, anti-trust regulation makes sense. If a private firm - any private firm - is so big that it has to be rescued when it gets into trouble to avoid taking the entire economy down with it, then it is too big. Divide the assets and liabilities of such firms into two or three new companies and let them compete.
If the firms that were overleveraged with risky derivative trading had been allowed to fail in 2008, with investors taking the losses and top executives held accountable, the market would have limited derivative trading on its own. Instead, irresponsible management was largely rewarded.
“We simply should not countenance a residential mortgage market, the largest part of our capital market, dominated by so-called government-sponsored enterprises,” Mr. Volcker said in his speech. “The financial breakdown was in fact triggered by extremely lax, government-tolerated underwriting standards, an important ingredient in the housing bubble.”
"By now it is pretty clear that it was faith in the techniques of modern finance, stoked in part by the apparent huge financial rewards, that enabled the extremes of leverage, the economic imbalances and the pretenses of the credit rating agencies to persist so long," Mr. Volcker said...IOW, even more regulation, even more gov't-cause market crashes.
The only way to stop major economic debacles like this one is to get the government out of the economic planning business.
It was deregulation that caused this crap, not regulation, derivatives and hedges funds were not legal, back when we had the level head law of insurable interest. Gramm legalized gambling and the tax payed took the bend over position
Mr. Volker was one of Obama’s economic advisors. He signed on to Obama’s spending binge. Any credibility he had as a voice of reason went out the window when he supported one of the most liberal senators for president.
We have always had derivatives. Stock options, for example, are derivatives. Moreover, derivatives and hedge funds did not cause the melt down. It was the forced unsound lending -forced by regulation and threat of litigation.
LOL, wrong, but you are free to believe anything you wish, but spending a little time on research might help. If you look you may find a date of 2000. http://m.cbsnews.com/fullstory.rbml?feed_id=0&catid=4546199&videofeed=36
Volker and Obama’s team had a falling out early in administration as he saw his advice ignored.
Yes, CBS is where everyone goes to be well informed and to get “research”.
You don’t understand the issues. So, let’s just have a liberal approach 3 minute Hate on derivatives and banks.
A derivative is just a financial instrument based on another financial instrument. So, for example, any option is a derivative. New derivatives have appeared in the last three decades, but derivatives are nothing new.
Now, go read a book.
Congratulations. You have achieved incoherence. Derivatives have been traded on Wall Street for a very long time. Ever hear, for example, of warrants, options, or loan participations? Apparently not.
Strips, CARS, currency swaps....
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