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Author Topic: Obama's Confusion "The case against global financial coordination"  (Read 1130 times)
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WhiskeyGirl
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« on: February 12, 2010, 07:51:21 PM »

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Unsurprisingly, Goldman Sachs and other Wall Street firms are dubious about the “Volcker rules.” So, too, are the Republicans in Congress, along with some Democrats who feel that the scheme has come too late and may interfere with other reform efforts under way, as watered-down as those initiatives may be. Such domestic opposition weakens the prospect that Obama’s proposals will ever become law.

But the international reaction was less expected. Obama’s announcement received a decidedly unsympathetic reception from Europeans, who perceived his initiative as a unilateral move that would undermine international coordination of financial regulation.

The announcement had come without international consultation. It also seemed to violate earlier agreements to cooperate with other nations through the G-20, the Financial Stability Board, and the Basel Committee on Banking Supervision.

At the World Economic Forum in Davos, US Congressman Barney Frank was surprised to discover that the greatest opposition to American plans came from international regulators. The Obama administration’s proposed measures would simply create “regulatory confusion,” one of them complained.

This is a widely shared concern. Financial Times columnist Martin Wolf accused the United States of injecting “new and unsettling ideas” into the discussion of financial reform. Continental European countries like big banks, and therefore will never go along with the Volcker rules, he wrote.

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In a world of divided political sovereignty and diverse national preferences, the push for international harmonisation is a recipe for weak and ineffective rules. That is one reason why international bankers love international coordination.

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If the United States wants to place size limits and tighter capital requirements on banks, it should be free to do so. If Europe wants to devise its own rules for credit-rating agencies and hedge funds, it should simply go ahead. Naturally, regulatory diversity would require cross-border financial controls to ensure that banks do not evade national regulations by operating from foreign jurisdictions. The rule would have to be: if you want to serve my market, you must play by my rules.

What ideas!

Play my my rules...

more here - http://biz.thestar.com.my/news/story.asp?file=/2010/2/13/business/5668472&sec=business
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