Financial Regulatory Forum

Big banks can be shrunk — here’s how

By Stuart Gittleman

NEW YORK, June 12 (Thomson Reuters Accelus) – A need to break up big banks is one of the several lessons policy makers should have learned from the financial crisis that have either been ignored or forgotten, according to Phil Angelides, who chaired the congressionally appointed Financial Crisis Inquiry Commission.

If the largest banks can only be run so recklessly that they harm the economy as well as themselves, they should be broken up, Angelides said in a talk at the Center for National Policy, an independent Washington D.C. think tank. (more…)

How to reduce the risk of future black swans: eliminate issuer-paid ratings

The following is a guest post by Kenneth Posner, author of “Stalking the Black Swan: Research & Decision-making in a World of Extreme Volatility.” The opinions expressed are his own.

Recently, the U.S. Financial Crisis Inquiry Commission (FCIC) held hearings on the role of the rating agencies in the near-death  experience of the U.S. financial system, an important topic given the disastrous performance of mortgage-backed securities rated AAA by Moody’s and Standard & Poors.

The problem with the rating agencies is not their role, but the oligopolistic domination of the business by these two firms. This domination is a direct result of the “issuer-paid model” under which rating agencies are paid by the issuers of securities, rather than investors.

Financial Crisis Inquiry Commission

Live coverage of the “The Shadow Banking System” hearing.

Top regulators to face U.S. financial crisis panel

By Kevin Drawbaugh

WASHINGTON, Jan 14 (Reuters) – Senior U.S. regulators, including outspoken Federal Deposit Insurance Corp Chairman Sheila Bair, will tell their side of the story on Thursday to a commission examining the origins of the 2008 financial crisis.

The 10-member panel, in its first public hearing, heard a tale of misjudgments and regret from top Wall Street bankers on Wednesday, but did not get an outright apology or any new explanations for the debacle that shook world markets.

Four of Wall Street’s top bankers acknowledged taking on too much risk and having choked on their own financial cooking in the subprime mortgage market, but they defended their pay packages and the huge size of their businesses.

Barons of Wall St concede failures, defend pay

By Kevin Drawbaugh

WASHINGTON, Jan 13 (Reuters) – Top executives of Wall Street’s biggest banks acknowledged broad failures as they testified to a U.S. commission looking into the financial crisis, while the White House said an industry apology was in order.

With U.S. unemployment near a 26-year-high after the worst recession in decades, public fury is growing over the cost of taxpayer bailouts and huge bonuses for bankers, now that the industry has rebounded from the 2008 meltdown.

The top executives acknowledged mistakes in managing risk but defended their pay packages and called for modest regulatory changes.

Bank of America’s Moynihan urges focus on “contagion risk,” not breakups

CHARLOTTE, North Carolina, Jan 13 (Reuters) – Bank of America Corp Chief Executive Brian Moynihan said on Wednesday banking regulation needs to focus more closely on limiting “contagion risk” between financial firms, rather than breaking up the biggest U.S. banks.

Moynihan called for broader changes in banking industry regulation — from accounting rules to leverage and capital requirements — to shore up a system that he said created a mix of combustible elements during the crisis.

“That starts with recognizing that ‘interconnectedness’ and not ‘bigness’ is what led to the need for taxpayer bailouts,” Moynihan said in testimony prepared for his appearance before the Financial Crisis Inquiry Commission, a 10-member panel formed by the U.S. Congress to examine the causes of the financial meltdown.

PREVIEW-US crisis panel will scratch but not maul bankers

By Karey Wutkowski

WASHINGTON, Jan 11 (Reuters) – The U.S. commission examining the financial meltdown is expected to take Wall Street bankers to task this week for a return to extravagant bonuses, but the spectacle should fall short of the political theater that marked a similar investigation of the Great Depression.

The 10-member, bipartisan Financial Crisis Inquiry Commission will hear from the executives just as public outcry is again reaching a fever pitch over the multimillion-dollar bonuses the banks are poised to award after hurrying to repay billions of dollars of taxpayer bailouts.

The panel is modeled after the Pecora Commission, which investigated the Wall Street crash of 1929. That commission was beset with political turmoil and sideshow moments including a dwarf who jumped on the lap of banker J.P. Morgan Jr. during his testimony.

FACTBOX-Witnesses for U.S. financial crisis hearings

WASHINGTON, Jan 11 (Reuters) – The Financial Crisis Inquiry Commission, a 10-member panel formed by the U.S. Congress to examine the causes of the financial meltdown, will hold its first public hearings on Wednesday and Thursday this week. Here is a list of the witnesses scheduled to appear.

 

Wednesday, Jan 13:

Panel one, financial institution representatives:

* Lloyd Blankfein, chief executive of Goldman Sachs Group Inc.

* Jamie Dimon, chief executive of JPMorgan Chase & Co.

* John Mack, chairman of Morgan Stanley

* Brian Moynihan, chief executive of Bank of America Corp.

 

Panel two, financial market participants:

* Michael Mayo, managing director and financial services analyst at Calyon Securities (USA) Inc

* Kyle Bass, managing partner at Hayman Advisors

* Peter Solomon, chairman of Peter J. Solomon Co

 

Panel three, financial crisis impacts on the economy:

* Mark Zandi, chief economist at Moody’s Economy.com

* Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California,Berkeley

Global financial regulation overhaul seen in 2010

By Kevin Drawbaugh and Huw Jones

WASHINGTON/LONDON, Jan 6 (Reuters) – Global financial regulation has changed little since the 2008 banking crisis, but that won’t be the case much longer.

U.S. and EU authorities are expected to hammer out the definite shape of a new regulatory order in 2010 that will fundamentally change how world banks and markets operate.

Stricter limits on leverage and capital will emerge, leading eventually to slimmer profits for banks, policy analysts said. Formerly unregulated off-exchange derivatives markets will have to conform to new procedures.

U.S. financial crisis panel sets first hearings

WASHINGTON, Dec 22 (Reuters) – A U.S. commission created by Congress to investigate the financial crisis has scheduled its first public hearings for Jan. 13 and 14, more than a year since the crisis shook banks and capital markets worldwide.

No witnesses were named by the Financial Crisis Inquiry Commission in a statement distributed on Tuesday. It said the 10-member panel will hold hearings throughout 2010 — a period in which the Senate will be debating regulatory reforms.

Deliberations by the commission could spark interest in the debate in the Senate Banking Committee over reforms. The House of Representatives on Dec. 11 approved a comprehensive bill to tighten government bank and financial market oversight.

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