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Tag >> Risk
Defenders of the Federal Reserve's current role and governance misconstrue its legal authority and overstate the risks of proposed reform, critics contend.
Some academics and regional Fed presidents themselves say a bill introduced by Chris Dodd, the Connecticut Democrat who chairs the Senate Banking Committee, would ultimately undermine the central bank's ability to fight inflation. In their view, to have regional Fed bank board chairmen subject to Senate confirmation, as the bill would require, would "politicize" monetary policy. Currently, regional chairmen are selected by the Fed's board of governors.
Finance guru Ed Kane and blogger James Kwak have done a terrific tag-team take down on the argument in favor of big banks.
But I'll save you the trouble of wading through it: Essentially, Kane and Kwak say that the downside for shareholders of the bloated, inefficient bureaucracies that characterize Citigroup and to a progressively lesser extent Bank of America, Wells Fargo, and JP Morgan Chase is outweighed by their ability to lean on taxpayers for support.
Is Bart Dzivi the second coming of Ferdinand Pecora? We'll soon find out, now that the Financial Crisis Inquiry Commission has named Dzivi to be its lead investigator.
That's the role that Pecora played during the congressional investigation into the causes of the Crash of 1929 several years afterward. And the Pecora hearings, as they came to be known after the aggressive investigator made the most of the public spotlight, were credited with paving the way for the establishment of the Securities and Exchange Commission and the Glass-Steagall Act.
There's been lots of talk around President Obama's Asian trip about China's economy being much more resilient than that of the U.S.
No question, China has bounced back from the global recession more quickly than the U.S. has. And its government clearly believes more firmly in investing in infrastructure and other means of underpinning its ability to produce rather than consume, as the liberal economist Robert Reich amply illustrates.
This summary of the latest report card on the TARP really drives home the contradictions and conundrums at the heart of the program, and is more reason to require the Fed to disclose its dealings with banks.
On the one hand, the article points out that the New York Fed had little leverage with which to fight the demands of Goldman Sachs and other banks that the Fed make them whole on contracts they held with AIG.
The bill that Senate Banking Committee Chairman Chris Dodd introduced on Monday to reform the financial system goes further in some ways than its House counterpart and the Obama administration's plan do, but not in others.
Senator Dodd's bill is certainly much tougher on the Federal Reserve. It would strip the Fed of its power to regulate banks and limit their influence over its other policy decisions by eliminating their ability to appoint a majority of the boards of the Fed's member banks.
So much for derivatives reform. According to this analysis of what the House Financial Services Committee passed in early October, even those derivatives that are supposed to be traded on an exchange may not have to.
Most derivatives are already slated for exemption from the requirement, as the bank lobby succeeded in convincing legislators that it would be impossible to send contracts negotiated between two parties to exchanges without curbing the parties' ability to hedge risk. Reason: Standardized contracts lack the custom features necessary for the purpose.
You know a piece of legislation is seriously misguided when both investors and corporations oppose it.
But what does it ultimately say about the banking industry that it feels the need to make its results less transparent? That's the upshot of having bank regulators as well as the Securities and Exchange Committee oversee accounting, as the legislation calls for.
There's a healthy contingent of investors who think the economic crisis has created an environment ripe for considering fundamentally new approaches to business. That includes pushing companies to take more seriously the idea of adopting environmental, social, and governance (ESG) practices.
One related idea is that stock exchanges have a role to play here by helping investors assess which companies are engaging in good governance and other practices and providing incentives to businesses both to adopt this approach and to disclose specific metrics about it. In other words, turning themselves into sustainable stock exchanges.
When is the press going to ask the Obama administration why Europe is wrong to break up bailed out banks?
At last count, four banks had been forced to divest operations in order to reduce their risk profile. The lastest: Lloyd's Banking Group and RBS , which will join ING and Northern Rock shedding businesses at the behest of their owners. And the French-Belgian bank Dexia is reported to be next on the chopping block.