financial reform

James Politi

Remember Ben Bernanke, Fed chairman, and Hank Paulson, then treasury secretary, heading up to Capitol Hill in September 2008 in desperation, begging lawmakers to spend a whopping $700bn to save the financial system? That may seem like distant history by now, but that money came in very handy again today.

After the death of Robert Byrd, the Democratic senator from West Virginia, yesterday, the prospects for passage of the massive financial reform bill, whose different versions were so ably reconciled during a series of marathon negotiating sessions on Capitol Hill last week, suddenly hit a wallRead more

Simone Baribeau

Charles Plosser, president of the Philadelphia Fed, today gave a quite interesting speech on developing regulation to address too-big-to-fail financial institutions. His comments (well worth a read) on the Squam Lake Group’s recommendations (also worth a read) come after a lull in the too-big-to-fail discussion. A few months back, living wills, robust resolution mechanisms, and early intervention were at the forefront of the public policy debate. But as the european debt crisis has captured headlines, officials have been quieter on their plans to address the TBTF problem (until today’s conference), with the notable exception of St Louis Fed president James Bullard, who’s been explicitly stating the implicit guarantee still holds. Read more

A plan to place the appointment of the New York Federal Reserve president under the jurisdiction of the White House and Senate, which the central bank fears will lead to its politicisation, could be abandoned on Wednesday.

The House financial services committee, chaired by Barney Frank, announced on Tuesday that it would seek to remove the proposal – which was included in a bill passed by the Senate last month – and replace it with an alternative that removes banks’ say in Fed appointments. Read more

Simone Baribeau

The White House is highlighting common problems of military families to push for more comprehensive financial reform.

Barack Obama today argued against an amendment which would exclude auto dealer lenders from increased consumer protections (that will be overseen by the Fed).

This amendment guts provisions that empower consumers with clear information that allows them to make the financial decisions that work best for them and simply encourages misleading sales tactics that hurt American consumers. Unfortunately, countless families – particularly military families – have been the target of these deceptive practices.

Last month, the White House blog included a post on military families being the potential victims of the proposed auto lending carve out, which said that, in the past six months, 72 per cent of military financial counselors had spoken with soldiers on abusive auto lending practices.

Dealers that target military families have an incentive to Read more

Simone Baribeau

The FT has just reported that “Republicans want checks on a proposed consumer financial protection bureau and the crisis powers of regulators as the price for supporting a landmark regulation effort.” Republicans criticise the proposed bureau, which would be housed in the Federal Reserve, for having too much independence.

Democrats have championed the consumer protection bureau in the strongest possible terms. Barack Obama told banks last week, “Unless your business model depends on bilking people, there is little to fear.” And Elizabeth Warren, chairman of the Congressional oversight panel told the Huffington Post last month: “My first choice is a strong consumer agency…My second choice is no agency at all and plenty of blood and teeth left on the floor.” Read more

Simone Baribeau

If Lord Adair Turner has received heat for his sometimes controversial comments, today he could take comfort in an “atta-boy.”

The chairman of the Financial Services authority, much maligned for his comments on “socially-useless” bank trading practices last year, received nothing but praise from Paul Volcker, former Federal Reserve chairman.

The architect of the so-called ‘Volcker rule’ called Lord Turner “extremely sophisticated” and “thoughtful” and urged participants at a Peterson Institute for International Economic to read his “very closely reasoned” speech on financial reform. He praised the analysis, which was highly skeptical of the benefits of financial services.

He later referred a question on potential downside to the Volcker rule – which would ban proprietary trading at commercial banks – to Lord Turner’s analysis. “He says some liquidity’s good, but at some point let’s stop its growth.” Mr Volcker then concluded that there would be no negative impacts from the ban.

Other highlights from Mr Volcker’s talk: Read more

Ralph Atkins

Might the global economy all go horribly wrong again?

Lorenzo Bini Smaghi, an ECB executive board member, has just warned that those who think the world will return to where it was before the economic crisis are “deluding themselves”.

Addressing a crowded Frankfurt reception hosted by the city’s chambers of commerce, he said: “If the world economy were to return to the pre-crisis situation, within a short timespan a new crisis would be likely to occur because the same imbalances that led to the crisis would build up again.”

In what I thought was a pessimistic comment – even by ECB standards – he went on: “Considering some recent developments and behaviour, and considering the way certain policies are being discussed and the thinking of some key players, such a scenario does not seem that unlikely.” Read more