Saturday, June 20, 2009

Fixing financial regulation in the US

The Obama administration has unveiled a proposal for modifying financial regulation in the US. I have a piece in Financial Express today responding to this. Also see Jayanth Varma, who wrote in Financial Express yesterday on it, and Avinash Persaud on voxEU.

3 comments:

  1. With the teacher and preacher of world's financial markets, faltering and fumbling while attempting to overhaul itself after having exported aftereffects of many of its flaws and failures to other nations worldwide; compulsory caveat needs to apply on every adapt and adopt measure locally or regionally. China being stuck with over trillion dollar investments within US. Blackrock overtaking FED is assets under management. These are telling signs, indeed. Severe pressure on economies and near/total failure of many global corporates and some countries are phenomenal events. Isn't it a beginning of geo-political shift from occidental to oriental albeit through a global crisis ?

    Hotch-potch unbridled and uncoordinated regulatory setup with "disclaimed" greed of credit rating agencies, opacity of OTC derivatives and shortsightedness of regulators at US has undermined global financial future which can't be overstated about its geo-political shift and deep implications.

    The seemly unassailable is not completely assessable even now, for its far-reaching impacts is beyond the multiple measures extending itself beyond sectors, geographies and generations, too.

    The collective global intellect didn't have foresight which we now know but one is inclined to talk individually as if we have collated sufficient contributory insight.

    It ain't over with the planned measures done in a hurry (trillions of dollar of aid to companies and credit line to countries) to bury the deep-rooted problems.

    Unshackling and unwinding the situation is small yet important step down a long road.

    May we reach where we wish to be as we didn't know earlier where we were headed and are placed right now !

    Manu Bhat
    IIFT

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  2. Ajay, from your article:

    '...."a transformation on a scale not seen since the reforms that followed the Great Depression". This statement is true, but that is only a comment on the lack of institutional reform in the US after the Great Depression.'

    So according to you, what changed under the New Deal? I believe this lead to the creation of the FDIC and SEC, among others.

    I'm not saying Obama's reforms are going to be the New New Deal (or New Deal 2.0 if you like) or even close, but saying that there was a lack of institutional reform after the great depression is factually incorrect.

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  3. Sorry, I was unclear. What I meant to say was: There was a burst of change after the great depression, and then after that the US basically froze in its structure of the Fed / SEC / CFTC / OCC / OTS / etc. That basic regulatory architecture has not been questioned. New knowledge has not been brought into thinking about what this architecture should be and how the critical legislations should be drafted.

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