U.S. Justice Department unit to ramp up hiring as mortgage probes advance
By Emmanuel Olaoye
NEW YORK, March 6 (Thomson Reuters Accelus) - The U.S. Justice Department plans to step up its hiring of staff to investigate abuses in the packaging of residential mortgage backed securities and to work with regulators to uncover serious fraud, a senior department official told Thomson Reuters in the wake of criticisms that Obama administration efforts were insufficient.
Last week, the former chairman of the Financial Crisis Inquiry Commission claimed that the government was not doing enough to uncover serious fraud. In a New York Times opinion piece, Phil Angelides said the 55 attorneys, agents and analysts assigned to the administration’s new mortgage packaging Working Group were not enough to uncover serious fraud. Angelides also criticized the absence of federal regulators in the Working Group. (more…)
Banker-author warns overseers to keep ‘extreme money’ in check
By Stuart Gittleman and Emmanuel Olaoye
NEW YORK, Sept. 19 (Thomson Reuters Accelus) – The “extreme money” and “voodoo banking” that are dominating the global financial system are too smart, too fast, too greedy, too self-absorbed and far too dangerous for traditional legislation and regulation, a veteran banker told Thomson Reuters.
Efforts to prevent another financial crisis are likely to fail unless lawmakers and regulators understand that the forces that drove the crisis of 2008 go back several decades. While keeping an eye on the past, the overseers should also look for the potential risks of proposals claiming to promote growth, and how they are disclosed, Satyajit Das says in his book, Extreme money: masters of the universe and the cult of risk (FT Press, August 2011). (more…)
Financial regulation scorecard
A House-Senate conference committee must find a middle ground between financial regulation bills passed by the two chambers. The committee’s final report could differ from earlier versions.
Once approved by both chambers, the compromise legislation will go to President Barack Obama to sign it into law. That could happen by July 4, analysts say.
Here’s a look at the status of major points in the House and Senate financial regulation bills.
ANALYSIS-Markets fret, but chance of big bank crash slim
By Steve Slater and Alex Chambers
LONDON, May 28 (Reuters) – This week’s market jitters that banks were heading back to the darkest days of 2008 look overdone because lenders have vastly improved their assets and central banks stand ready with abundant funding.
Bank of Spain’s bailout of a small regional bank has brought back the spectre of another systemic crash after the demise of Lehman Brothers in 2008, this time on concerns about the financial sector in the euro-zone’s periphery.
But the conclusion is too hasty, analysts said — and a recovery in markets since the middle of the week is confirming that view.
“We’re not back to the crisis days of 2008. The banks are not going into this period of turmoil with anything like the balance sheet structure they had two years ago, they are in much better shape,” said Simon Maughan, analyst at MF Global.
Not only have banks more capital and liquidity, there is also less economic stress. “We were heading into a recession in 2008, we’re heading out of one now,” Maughan added.
Interbank borrowing costs — a much-watched gauge of the trust banks have in each other — rose to a 10-month high this week, unsettling investors, but many blame the problem mainly on a shortage of dollars in the system rather than outright fear of a bank counterparty failing.
ANALYSIS-Next phase of financial crisis may be the hardest
By Emily Kaiser
WASHINGTON, May 21 (Reuters) – It took $5 trillion and an unprecedented global coalition of G20 countries to stabilize the economy after investment bank Lehman Brothers collapsed in 2008. Quelling the next phase of the financial crisis may be even harder.
To stop the panic that erupted nearly two years ago, governments transferred a mountain of debt from private to public accounts. Now, those government debts are distressing financial markets and there is nowhere left to shift the burden.
Europe’s clumsy response to Greece’s debt woes highlighted the economic and political headaches that await debt-laden countries and those who finance their borrowing.
European leaders have yet to convince investors that they have a credible short-term plan to contain government deficits and a long-term answer to the region’s slow growth. Until they do, financial markets will remain volatile, and the hard-fought economic recovery is in jeopardy.
“Europe is trying to solve a debt problem with further debt,” said Domenico Lombardi, president of the Oxford Institute for Economic Policy.
Fixing the problem will require money and political will. One cannot work without the other, and both are lacking.
A possibility is to have the financial sector and investors contributing to ease the burden these packages for financial stability have put on taxpayers by introducing transaction taxes. For example, Germany had such tax (1-2,5 promille per transaction, depending on type of transaction) until -91. Had this tax been in place today it would have generated 30 biljon €. The german deficit is this year 70-80 biljon €.
A tax like this will not majorly affect long-term investment required for economic growth, but will cool down rapid transactions with small margins (speculation). For the economy as a whole, it is better if the financial sector shares the burden in this way, than if some parts would carry the losses of defaults. The financial sector is expected to disagree and fight such solution with teeth and claw.
Market Structure Moves to Top of Regulatory Agenda
The SEC’s chief said the growing concerns about technological changes in the capital markets are going to drive much of the agency’s agenda for the rest of the year. She fears creation of a two-tier system—one for hedge funds and other large traders and a more limited tier for everyone else. Her goal includes passing a series of rules designed to update the basic principle of market fairness that was established at the agency’s founding during the New Deal, according to Thomson Reuters Checkpoint’s WG&L Accounting & Compliance Alert. (more…)
US Congress Looks for New Ways to Tax Financial Services
During a congressional hearing, lawmakers searched for ways to use the tax code to dampen short-term speculation in the financial markets and close the budget deficit. To fix the problem, they suggested changes in tax structures, including discounted capital gains tax for long-term investors, transaction tax, bank tax, and financial speculation tax, Thomson Reuters WG&L Accounting & Compliance Alert reports.
Bernanke confirmation shakier as more Democrats defect
By Thomas Ferraro and Pedro da Costa
WASHINGTON, Jan 22 (Reuters) – Ben Bernanke’s nomination for a second term as U.S. Federal Reserve chairman, once seen a sure thing, appeared increasingly under threat on Friday after two Senate Democrats said they would vote against it.
“I believe there will be the votes to confirm him, but it’s going to be very close,” a senior Democratic leadership aide said.
With the U.S. job market in disarray, voters angry at Wall Street firms and members of Congress worried about their re-election in November, the Fed and its chairman have become targets for discontent.
Senators Barbara Boxer and Russ Feingold brought the total of known ‘no’ votes among the Democratic majority to four, while many others have said they were undecided.
Several Republicans also oppose him and some senators have moved to block his confirmation, forcing Senate leaders to secure a super-majority of 60 vote in the 100-member chamber to move the nomination.
“It is time for Main Street to have a champion at the Fed,” Boxer said. “Our next Federal Reserve chairman must represent a clean break from the failed policies of the past.”
UK finance executives worried by regulation – CBI
LONDON, Jan 18 (Reuters) – London’s status as a world financial centre is at risk due to a combination of rising regulation and global economic shifts, according to senior executives polled by Britain’s biggest business lobby.
London has emerged from the 2008 banking crisis but it faces fresh threats from a transfer of economic power to Asia, as well as potential unilateral regulatory action aimed at prevening a repeat of the financial meltdown, the Confederation of British Industry quoted company executives as saying in a report.
“London will lose market share, though it won’t diminish in importance,” Stephen Green, chief executive of HSBC, Europe’s biggest bank, told the CBI. “This is not because of the financial crisis, but because of shifts in the global economy.”
Other executives singled out a potential regulatory crackdown in the wake of the banking crisis as the most serious threat to the British capital’s financial services sector.
“What is potentially damaging to London is if the regulatory burden becomes too burdensome,” the report quoted Michael Spencer, chief executive of interdealer broker Icap, as saying.
British regulators are expected to set higher capital requirements on banks, making them more risk-averse, but also less profitable during boom times.
Banking industry executives are also concerned that rising personal taxes could force many financial services companies to shun London in favour of rival centres such as Singapore or Hong Kong.
U.S. Senate panel nears agreement on role of Fed
By Rachelle Younglai
WASHINGTON, Jan 6 (Reuters) – As Congress moves to reform U.S. financial regulation, key senators are nearing bipartisan agreement on stripping the Federal Reserve of its authority to supervise banks, two people familiar with the matter said.
Senate Banking Committee Chairman Christopher Dodd, in charge of shepherding reform legislation through the Senate, has introduced a bill aimed at preventing a recurrence of the 2008 financial crisis that shook economies worldwide.
The outlook for that legislation and Dodd’s handling of it shifted suddenly on Wednesday, however, with news that he has decided not to seek re-election in November.
“Dodd is freed up to do what he thinks is good policy not good politics,” said a financial services industry executive.
“It takes the politics out of the equation. The politics was that he was regarded as too close to industry and had to pursue reform that was seen as spanking the industry.”
Dodd’s draft bill would create a super cop to police U.S. banks and new agencies to oversee risk in the financial system and consumer protection.
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