Financial Regulatory Reform Legislation
http://thedianerehmshow.org/shows/2010-04-26/financial-regulatory-reform-legislation
President Obama called on big banks to join him in reforming financial regulatory rules. The Senate plans a key vote Monday. What's in the bill and how new legislation could affect Wall Street and Main Street.
Guests
Michael Greenberger
professor, University of Maryland Law School; director, Center for Health and Homeland Security; and former senior regulator, Commodities Futures Trading Commission.
Kevin Hall
national economics correspondent for McClatchy newspapers
Stacy Kaper
reporter for American Banker
Comments
Please familiarize yourself with our Code of Conduct and Terms of Use before posting your comments.
I have heard nothing about the role of accounting firms in the collapse of these companies other than that Ernst and Young has been named as a defendant in a shareholder suit against Lehman. Are any changes being proposed for them? It seems they are a crucial part of the transparency process.
Diane:
Thank you (as always) for your show.
I think the US population will continue distrusting its government unless a truly firm stance is taken on this matter. At minimum, such firmness might include prohibition of "casino/gambling" activities in financial markets coupled by large fines and/or taxes. The fundamental basis of capitalism is at stake if a strong position by the US government is not taken to keep the underlying economic activities proper. There are good financial reasons for certain instruments, such as futures and option. There is simply no good reason (other than avoiding a plane flight to LasVegas or Atlantic City to gamble) for this sort of activity.
Donald R. Kamens, MD
It surprises me that everyone points fingers at the banks without talking about the regulators and the same members in Congress who have been lying in bed with the banks and financial institutions adn now accuse them of having "fleas." This includes everyone from the President, Finance C'ttee Chair Dodd and ranking Republican Shelby, even though surprisingly he got the least amount of money. There goes the widely-held theory of Republicans being cozy with Wall Street.
Wouldn't the fund, in the Senate Bill, that banks are to pay into, be analogous to typical performance bonds that many working professionals and tradesmen are required to post?
Your guests are missing the point of the 50 billion dollar fund. It is not a rescue nor a bailout fund. Monies from the fund are to pay for the process of taking out of existence, destroying, eliminating the failing institution, not for propping it up. the stockholders loose their money and the institution ceases to exist. The fund is to do this without catastrophic instantaneous collapse. There is no bailout.
Just as banks and financial institutions buy their ratings from the organizations who rate them, hospitals pay JCAHO to judge them! There is just as much opportunity for corruption in this aspect of our healthcare system as in our banking system. The difference is, the latter can actually kill taxpayers, when they're patients in corrupt hospitals with inappropriately high JCAHO ratings.
The dismantling of walls between consumer and investment banking was disastrous. The behavior of credit card companies and brokers has been shameful in the way they treated their customers. The financial sector and Wall Street have treated the American economy, the combined sweat of millions of American workers, as a casino and the American taxpayer as an ATM. They will likely maintain their leverage over Washington so they'll still be the only game in town. Their opposition to reform will be a PR mess. But the executives who can't seem to live on less than a king's ransom will consider it the cost of doing business. I don't have much hope that anything less than a strong and clear legislative bill will have any effect.
What about mortgage derivatives? Can we not keep mortgage and home equity loans closer to the community that has a vested interest in successful repayment?
It seems like congress develops the regulatory structure appropriate for the financial crises that have already happened, and unfortunately the next crisis doesn't have the good form to repeat the past. What makes us think that this time congress will be accurate fortune tellers? Doesn't the "fix" need to be something structural (like breaking up companies) rather than regulatory.
Necole (pronounced Knee-cole) from San Antonio TX
If the $50 billion bail-out fund written into current bill is to be funded by the financial institutions themselves-----and NOT the American taxpayers, aren't the republicans misrepresenting this portion of the bill and thus supporting the concerns of the financial industry? Also, wouldn't the fact that the financial institutions have to fund this bail-out fund be somewhat of an insurance/assurance policy in that they would have to police THEMSELVES because they would all have a stake in this fund and it's need to be expended because of THEIR actions?
We keep hearing that if we do not regulate these fellows, then this "mess" will all happen again, as if it was the weather. Why do "the people" have to create diapers for Wall Street? Cannot they toilet train themselves?
How can congress regulate financial institutions when the voters cannot effectively regulate congress?
Campaign financing laws must be changed before anything else can be accomplished.
Multitude of causes and difficult solutions: The synthetic CDOs certainly are at the heart, but there seems to be a perception that the concept is new--not so. "Naked calls" have been around forever and the synthetic CDO is a logical (if devastating) evolutionary creature. However, 1) writing "naked calls" are highly regulated, both with respect to the the trader's assets available to back up the exposed position and with respect to margin requirements; 2) synthetic CDOs at this point are utterly unregulated, i.e. no supporting capital requirements, and their scale is vast compared with traditional option trading, capable of capsizing the financial system. Ultimately seems to be a game of "musical chairs" where no one knows who the players are (and to whom the players hope to pass the buck--caveat emptor).
Ultimately, It was about Greed! I believe that banks should do banking, I belong to a Credit Union which do banking. Any inverstment activaities and do via a third party vendor and not by the Credit Unions themselves. Banks should act in the same way.
I am against punishing a child by physical means. I think it is important that a child understand right and wrong by parental example and by removing child from situtation where they may be rewarded for negative behaviors. I also think it is important to give the child an alternate behavior to substitute for the negative one. One of the problems that I see societally is that once the abuse reaches extremes, there is not enough enforcement with parents to prevent them from continuing this punishment to a child such as whipping with a switch and other physical abuse.
Why is the bailout fund a moral hazard? Banks and investment institutions are already doing whatever they please. And call me a pessimist, but I cannot see a bunch of politicians cutting their own throat by hampering their best friends, the banking industry, with substantive reform.
What's wrong with the idea of throwing people in regular - not white-collar - prison if it's proven that company leaders acted in in bad faith? How and why is this type of crime treated as something less important than than murder and war crimes?
I would like to see jail time for the people that caused the Great Recession, along with the politicians that were lobbied into legalizing it. Yes, we may have to replace a large number of CEOs and congressman, but we have plenty of people out of work that would be happy to give it a shot.
You ever notice how npr and Diane always supports the left no matter what. They blame Bush for our economic problems but DUH didn't chris dodd and charle wrangle force those banks to make those bad sub prime lones? I sure didn't here them mention that. I wonder why. Why don't they own up to this.I guess the hurts.
Hey all,
I work in the industry and think it’s important to note that the auditors for these banks operated under existing rules and GAAP (Generally Accepted Accounting Principles).
According to Compliance Week, “companies were still following Financial Accounting Standard No. 140, Accounting for Transfers and Servicing of Financial Assets, to decide when an asset transfer qualified as a sale (that could be kept off the balance sheet) or when it had to be treated as a financing (that remained on)….That rule has since been codified into the Accounting Standards Codification under ASC 860-10.”
The rules have changed but we shouldn't be passing judgement in retrospect.