Wall Street is at it all over again
By Charles Reinhardt - Tuesday, April 23, 2013 - 0 Comments
David Viniar, former executive vice president and chief financial officer at Goldman Sachs, waits to testify before the Senate hearing on "Wall Street and the Financial Crisis: The Role of Investment Banks" in Washington, April 27, 2010. (Jim Young/Reuters)
On Tuesday, April 16, Bloomberg, the financial news and data giant, filed a lawsuit against the Commodity Futures Trading Commission, one of the most important regulatory bodies overseeing U.S. financial markets. The lawsuit was about new rules governing financial instruments known as swaps—rules, which, according to Bloomberg, will push investors toward new hybrid financial products that “have less regulatory requirements, less transparency, but pose much higher investor risk” than swaps. These adverse and “presumably unintended” consequences, the legal statement goes on to say, are a good enough reason to halt the rule’s implementation.
There’s a feeling lately among long-time Wall Street observers that U.S. financial regulators seeking to tame the industry’s excesses are engaged in a cat-and-mouse chase in which the mouse is often one step ahead.
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Why Canada hates the Volcker Rule
By Charles Reinhardt - Wednesday, February 13, 2013 at 9:00 AM - 0 Comments
Former U.S. Federal Reserve Chairman Paul Volcker. (Jonathan Ernst/Reuters)
In his speech at Harvard University this week, Deputy Governor of the Bank of Canada Timothy Lane took aim at the very cornerstone of Obama’s 2010 landmark financial reform bill. And then he shot: Canada, he said, does not “agree that the Volcker Rule is the only — or the most effective way to prevent excessive risk-taking in financial institutions.”
After everything that happened in the U.S. with the financial crisis — and everything that didn’t happen in Canada thanks to our prudent approach to financial regulation (no bank bailouts, no housing crisis, no massive job-destroying recession), you’d never expect Canadian officials to be so vocally opposed to efforts to tighten oversight of the financial markets south of the border. But they are.
The Volcker rule, named after former Federal Reserve chairman Paul Volcker, is a complex piece of financial regulation that aims at preventing large banks from putting customers’ money at risk.
That sounds good — except the legislation imposes a number of rules on Canadian banks too. Very costly, restrictive and unnecessary rules, according to critics on this side of the border.
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REVIEW: Volcker: the triumph of persistence
By Andrew Stobo Sniderman - Friday, September 21, 2012 at 11:18 AM - 0 Comments
The saga of Paul Volcker, perhaps America’s lone unsullied statesman of finance and banking, unfolds in three heroic acts. First, he persuaded “Tricky Dick” Nixon to sever the link between the American dollar and gold in 1971, which ushered in the more sustainable (and, yes, often more unstable) world of floating currencies. Second, as chairman of the Federal Reserve, he stared down Jimmy Carter and Ronald Reagan to stop the devastation being wrought by inflation. Volcker was a Democrat, but that didn’t stop him from precipitously raising interest rates (and unemployment) six weeks before the 1980 elections. Sorry, Jimmy, but Volcker took orders from data, not politics. Reagan was happy to win the election with the inadvertent assist, but was rather less pleased when Volcker was similarly implacable for the next six years. Finally, in 2008, Volcker appeared at Barack Obama’s side to help rescue the financial system, with mixed results.Silber, a professor at New York University, records what Volcker did, but also explains why, drawing on extensive research and 100 hours of interviews with Volcker. Silber does his best to make monetary policy debates seem as dramatic as they were consequential. This leads to some overwrought metaphors (the price of gold serves “as a carbon monoxide detector for inflationary expectations”), but mostly Silber succeeds in evaluating Volcker’s judgments over the years with clarity and without unnecessary reverence for a living legend.
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Regulating banks: maybe bureaucrats aren't so bad after all
By John Geddes - Sunday, July 11, 2010 at 1:02 PM - 0 Comments
Among the trickier stories to follow in the aftermath of the 2008 financial markets meltdown has been the debate over banking regulation. Clearly, something went catastrophically wrong, especially in the U.S., but exactly what?
Proponents of a largely unbridled market have argued—not persuasively, to my mind—that the core problem wasn’t lax regulation and permissive oversight, but rather perverse signals from government. They blame, for instance, U.S. government policies aimed at promoting home ownership for having skewed the mortgage market.
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The first step to recovery
By Jason Kirby - Friday, May 8, 2009 at 11:55 AM - 4 Comments
The free fall is over, but the comeback will be like nothing we’ve seen before
As Christina Romer settled in to provide the latest economic update for U.S. lawmakers last week, they no doubt braced for another round of brutally frank and frankly chilling discussion on the state of the world’s most powerful engine of wealth. Despite Romer’s clout within President Barack Obama’s inner circle—shortly after the election he asked the Berkeley economics professor and expert on the Great Depression to chart America’s path to recovery—few outside of Beltway policy wonks and Wall Street economists knew much about her. On the surface, her comments seemed to reinforce the grim outlook that’s become so pervasive since the economy went into free fall last autumn. “I’m sorry to say, but in the short run, we are still in for more bad news,” she told the committee members. “We expect to see continued declines in employment and rises in unemployment.” Then came a rare yet welcome but. “We are beginning to see glimmers of hope that the economy is stabilizing.”Romer’s tone was hardly exuberant, but her comments stood in stark contrast to the utter despair that was de rigueur just weeks ago. What’s more, she’s been joined by a host of sage old voices of the American economy, who together are offering a more reassuring, if cautious, message to the world: we’re not out of the crisis yet, but the worst seems to be behind us. Paul Volcker, the 81-year-old former chairman of the Federal Reserve and the head of Obama’s economic recovery advisory board, last week said the downturn is “levelling off” even if the U.S. economy remains in “intensive care.” Then, over the weekend at the annual Berkshire Hathaway annual meeting in Omaha, Neb., the company’s legendary founder and CEO Warren Buffett tried out another metaphor to convey his sense of cautious optimism. “Our economy, back in September, was like finding a friend of yours in quicksand up to his chest and he’s going down,” Buffett said. The rescue attempt has been painful but necessary. “The important thing was to get out of the quicksand, and we got out.”
