The US government’s proposals for financial sector reforms were released last week. Barring giving powers to the Federal Reserve to regulate systemically important institutions even if they were not commercial banks, the proposals do not appear to go far enough. It is silent on the issues of conflicts of interest in many areas. One is concerning rating agencies. Those who seek good ratings pay for it. Plus, they shop around for ratings. Further, credit-rating agencies have a macroprudential role, given the nature of their tasks...There are no “cooling off” periods and no moratorium on someone moving from the government to Wall Street and back. Directly or indirectly, such easy revolving doors advance the cause of regulatory capture of the government by Wall Street.
This sounds like the job rotation between the big banks, Treasury, Federal Reserve, and many political offices.
Doesn't our government recognize the conflicting interets? I hear much from Obama about keeping the insurance companies honest, Who is keeping Capitol Hill, The White House, Treasury, and Federal Reserve honest?Nor are there any concrete proposals on executive compensation. Excessive compensation was not about absolute dollar amounts, but about the lack of adjustment for risk. If the risks in the bets paid off, those who took the risk are paid. If the risks result in losses, the enterprise (shareholders) and even worse, taxpayers bear the losses. The white paper does not have much to say on it.
Why isn't the taxpayer being taking out of the equation? Taxpayers are now stuck with the big loss of AIG's casino gambling operation. Questions remain.
Who authorizes all those 'pass through' payments from AIG to the big domestic, international, and global banks? Why didn't they take a hair cut? Why aren't the employees in those positions training replacements? Are they forbidden to seem employment with "pass through" banks or in government after their employment ends with AIG?
In India, the Reserve Bank of India solved the problem neatly in one particular instance. The central bank allowed for profits from securitization to be realized only at the end of the life of the special purpose vehicle rather than at inception. So, if anything goes wrong as happened in the case of securitization of subprime mortgages, then no profits are reckoned nor bonuses paid. It is good to note that the US government’s proposals explicitly embrace this approach in its proposal to reform securitization practices.
Are the US government's proposals law yet? Still intact?
In the past, there has been asymmetry in the apportioning of losses or the cost of bailouts between the internal stakeholders (shareholder and lenders) and external shareholders (taxpayers). Hence, transparent guidelines for loss apportionment are both intrinsically desirable and would increase stakeholder oversight on bank management.
http://www.livemint.com/2009/06/22203230/Regulatory-wrinkles.html?h=BWhy allow banks to get into the insurance business? Expecially, in a situation where they profit and take NO risk?
How long before the taxpayers are bailout out these new insurance/bank entities?
