Financial Regulatory Forum

Ending the era of bank bailouts

The following is a guest post by Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University School of Law, and a former assistant general counsel to the Federal Reserve Board of Governors. The opinions expressed are his own.

As Scott Brown and Barney Frank hash out the difference between a tax and an insurance premium, it’s important to return to the very basics of banking. Banks are in the business of buying and selling money.

They buy money as deposits and other borrowings. They sell it as loans and investments. If someone with deep pockets is foolish enough to guarantee a bank’s deposits and borrowings, that bank can buy money more cheaply. Further, if that person gives his guarantee for free, the bank would have a competitive advantage.

If I told you that an elite class of banks has found such a fool to guarantee their debts, you’d probably want to know who it is. Well, it’s you and me, the taxpayers.

Then you’d want to identify the elite banks so that we could cut off the guarantee, or at least begin charging them for what we’re giving away. Does “too big to fail” ring a bell?

U.S. financial regulators stake out turf defenses

U.S. Treasury Secretary Timothy GeithnerBy Kevin Drawbaugh
WASHINGTON, July 24 (Reuters) – Senior U.S. financial regulators defended their turf in remarks to be delivered on Friday at a congressional hearing on the Obama administration’s sweeping regulatory reform agenda. (more…)

US’s Geithner- will work with Congress, but regulatory overhaul essential

Treasury Secretary Timothy GeithnerWASHINGTON, July 24 (Reuters) – U.S. Treasury Secretary Timothy Geithner said on Friday he was willing to work with lawmakers on shaping an overhaul of financial regulations but insisted major changes are necessary. The financial crisis of the past two years show the financial system “failed in its most basic responsibility” to supply credit and protect consumers and that cannot happen again, he said in prepared testimony for delivery to the U.S. House of Representatives Financial Services Committee. (more…)

U.S. FDIC wants limits on consumer finance agency authority

WASHINGTON, July 24 (Reuters) – The Federal Deposit Insurance Corp on Friday argued for limits on a new agency to protect consumers from risky financial products and warned against stripping consumer protection duties from bank regulators. (more…)

Fiat wins EU clearance to buy Chrysler

CHRYSLER-PRODUCTION/BRUSSELS, July 24 (Reuters) – The European Commission on Friday unconditionally approved the purchase of bankrupt U.S. automaker Chrysler LLC by Italy’s Fiat SpA, saying the transaction would not damage competition in Europe. (more…)

“Fed fatigue” weighs on Obama regulatory push


WASHINGTON, July 23 (Reuters) – The Obama administration wants to hang a new shingle over the U.S. Federal Reserve’s marble-columned door that says “systemic risk regulator.” But many lawmakers, from both parties, aren’t feeling very confident about the Fed. It’s an issue surrounding a central part of President Barack Obama’s plan to overhaul financial regulation and it prompted skeptical comments at a Senate hearing on Thursday. (more…)

Obama team asks Congress to combine bank regulators

By David Lawder and Patrick Rucker
WASHINGTON, July 23 (Reuters) – The U.S. Treasury Department on Thursday sent Congress a plan that would consolidate two federal bank regulators in a move it said would help prevent lenders from seeking the loosest oversight. (more…)

U.S. SEC approves two firms to clear credit-default swaps

WASHINGTON, July 23 (Reuters) – ICE Clear Europe and Eurex Clearing AG have been given permission to clear credit default swaps, a type of derivative that exacerbated the global financial crisis, the Securities and Exchange Commission said on Thursday. (more…)

Mexico faces huge revenue gap, tax overhaul planned

Mexican Finance Minister Agustin CarstensBy Jason Lange
MEXICO CITY, July 23 (Reuters) – Mexico will have to cut
spending and raid its rainy day savings to cover a 480 billion
peso ($36.6 billion) hole blown in government revenues by the
recession, Finance Minister Agustin Carstens said on Thursday. (more…)

Swiss clinch deal as it seeks to shed tax haven label

ZURICH, July 23 (Reuters) – Switzerland’s Finance Ministry said on Thursday that on drafting an agreement with Finland it had brought to 12 the number of tax deals initialled in efforts to be removed from an international “grey list” of tax-havens. (more…)