Size doesn’t matter, says white paper on systemic risk

The idea of imposing a levy on large financial firms is a “flawed policy”, with economic costs outweighing any potential benefits, according to a recent white paper prepared by Washington, DC-based Nera Economic Consulting.!

Such a process is not only subject to gaming by firms, but is conceptually flawed

The white paper, which was prepared for the Property Casualty Insurers Association of America, is being distributed to members of the Senate Committee on Banking, Housing and Urban Affairs this week. Democrats and Republicans on the committee are wrangling over proposals for financial regulatory reform.

the paper argues a more appropriate definition of systemic risk would rely on other measures. These include interconnectedness, leverage and the cyclicality or correlation of risk exposures. Firms with overly cyclical or correlated risk exposures are seen as posing greater systemic risk, including banks with bumper exposures to the US subprime mortgage market, for example.

Liquidity risk is another important factor, the white paper adds. Firms with liquidity mismatches – investment banks that support long-term assets with short-dated wholesale funding, for instance – pose a greater systemic risk, it says. Furthermore, companies that are less transparent about their operations are also more likely to pose a systemic risk, as this will have an impact on the willingness of investors to continue holding debt and equity in those firms.

In December, the House Financial Services Committee passed measures requiring large financial firms to contribute to a fund that would be used in case systemically important firms collapse. Banks with assets of more than $50 billion and hedge funds with assets of more than $10 billion would be made to contribute to the so-called systemic dissolution fund.

Still, in a deflating US economy, The Whores on the Hill, all other levels of goobermint, and the State Run Media refuse to even discuss the beginning of the downsizing (i.e. complete abolishment) on many social engineering programs, departments, agencies, etc., etc., as well as a 10% cut across the board of all spending, minus the DoD’s budget as the US military is still involved heavily in 2 combat theaters.

When the times comes, they may cut the budget, but not enough and in the wrong order. Those insisting on cutting the spending in the right order and deep enough are called "kooks" by Dems and RINO's.

RINO's, they sat around and do nothing until grassroots work hard to provide forward momentum, then hijack it, riding it to their electoral victories, and marginalize those who did the real work, going back to their beltway incompetence, finally losing their edge. They turn into an impotent mush. They get kicked out of power, and wait for another grassroots momentum.

It happened in 2000 election. It is now happening in 2010. No sooner Tea Parties got going than they came out of their woodwork and co-opt leaders of the movement, while presenting themselves as wise men. They warn against infighting which they say will benefit liberals. They always stay where they are and refuse to change their position. If challenged, they say their detractors are divisive, and in danger of being exploited by the political enemies. If they fear dissension so much, why don't they take the step to close the gap, by moving close to the grassroots, and get rid of RINO's before grassroots demand it? But they won't.

Since GWHB presidency, it has always been this way. We will be asked again to close ranks behind mealy mouthed moderate again, who proclaim to be compassionate to something or somebody, or swooning about thousand points of light. If that does not work, they will pretend to back a grassroots representative, while working hard to turn him/her into their kind of mush. To them, grassroots is just an occupational hazard they have to deal with to survive.

I won't be surprised if somebody pegs me as an agitator who is going to divide conservatives.

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