Summit Notebook
Exclusive outtakes from industry leaders
Shunning bankers
Banker bashing has become a bit of an international sport — and fraud allegations against Wall Street giant Goldman Sachs and a U.S. class-action suit against Germany’s Deutsche Bank has added more grist to the mill. So it’s small wonder that a bank lobby group struck a wistful note at the Reuters Global Financial Regulation Summit in London on Tuesday.
“No politician, for the next couple of years, is going to be close to a banker, hug a banker, be friendly to a banker,” said Mark Austen, the acting chief executive of AFME (Association for Financial Markets in Europe). “They (banks) are seen as institutions that have caused a crisis … We are still faced with a public’s anger to the banking community … It will take time to rebuild that trust.”
“The only thing we can do is be as constructive and neutral as we can possibly be.”
But some lawyers note bank lobby groups appear as powerful as ever. From a starting point last year, in the wake of the financial crises, where regulators discussed breaking up big banks, discussions are now centering on higher capital and liquidity buffers, living wills and bank levies. “Regulators and governments in major financial jurisdictions have really backpedalled over the last year,” says one.
Written by Kirstin Ridley in London.
Against high Hill drama, SEC chief mum on Goldman
First of all, Securities and Exchange Commission Chairman Mary Schapiro would not talk about Goldman Sachs.
There was no drawing her out. The head of the agency that filed a civil fraud lawsuit charging that Goldman misled investors would not say a word about the case.
Quite the opposite from the high-drama being played out at the same time on Capitol Hill where Goldman Sachs executives were facing the fusillade at a Senate hearing, where one senator kept repeating “shi–y deal.” (There are two t’s missing from that word).
Schapiro in an interview at the Reuters Global Financial Regulation Summit just was not going to go there. “I’m not going to comment on Goldman,” she said before one reporter even got the question out.
Even while responding to a tangential question, she began by saying “put the Goldman case aside,” careful to make sure her answer would not be linked to the investment bank.
Asked whether this could be seen as the start of the SEC’s war on Wall Street, Schapiro replied: “Well first of all, I’m not going to comment on Goldman. There is no war on anybody.”
She went on to say: “I guess what I would like to see is people take a big step backward and think about who are we here to serve, and how do we best serve them?”
FDIC Chair Bair: think before you point that finger…
The latest blame game circulating in Washington on financial regulation may end up with those who point fingers finding that they have three fingers pointing back.
During the debate on tightening financial regulations, there have been some backhanded jabs at regulators with the implication that perhaps they were asleep at the wheel. Just this morning on NBC’s “Today” show, Democratic Senator Claire McCaskill said Wall Street had been creating things just to bet on — “they were like the casino, but they had less regulation than Las Vegas.”
Well hold on. Who’s fault is that?
We asked Sheila Bair, chairman of the Federal Deposit Insurance Corp.
She said when it comes to regulating many of the complex over-the-counter derivatives, the blame actually fell into the lap of Congress which decided against putting them under the oversight of the SEC or CFTC or insurance regulators. And in fairness to Congress, the Federal Reserve and Treasury condoned that action, she said.
“On derivatives, Congress did that,” Bair said at the Reuters Global Financial Regulation Summit. “That’s all history now.”
The CFTC does regulate exchange-traded derivatives such as futures and options, but it’s the over-the-counter stuff that’s unregulated.
Is she saying that Feinberg and Levin themselves could arguably be prosecuted for fraud too? Well, Ms Bair, why don’t you elaborate about that indirect accusation. Maybe investors have another source where they can recuperate defrauded money and send their kids to the college of choice!
CFTC’s Gensler explains the present with the past
Gary Gensler, chairman of the Commodity Futures Trading Commission, likes to go to the past — sometimes as far back as 1,000 years — to explain the financial situations of today.
For example, derivatives existed for 145 years, since the Civil War, and they became regulated in the 1930s, he said at a Reuters Global Financial Regulation Summit in explaining that derivatives need regulation.
If you only want to go back a couple hundred years, Gensler had this to say: “Somebody in the 19th century invented street lights, somebody invented stop signs, somebody invented traffic lights.”
And that probably raised costs just like regulation of derivatives may do. “Just like a street light protects you from dark and dangerous highways, we need something to protect us from the dark and dangerous market that right now is over-the-counter derivatives,” he said.
Asked about the Goldman Sachs trader who’s been in the headlines in recent days, Gensler said he would not comment on any specific firm, but he reached back even further for explanation. “For thousands of years there’s been good people, there’s been bad people.”
Gensler, a former partner at Goldman, was asked how he felt about the firm that he left 13 years ago showing up in the headlines these days.
“My daughter called me up one day and said daddy you’re in Rolling Stone magazine,” Gensler said, adding that she said it was not a favorable article.
ABA’s Yingling sees danger in rhetoric: it’s Wall Street, not banks
Ed Yingling, president and CEO of the American Bankers Association, is a little worried about the rhetoric that’s been flying around as Congress tries to produce financial reform legislation.
And he wants people to be clear that the problems are with Wall Street, not banks.
Though, the differentiation gets a little tricky here because some of the largest banks in the country and biggest players on Wall Street are members of his organization and received taxpayer bailouts. The thousands of other banks that his trade association represents did not.
“The general tone has I think been harmful, particularly to the banks we represent,” Yingling said at the Reuters Global Financial Regulation Summit 2010.
But at least one key person got it right — President Barack Obama in his speech on “Wall Street Reform” last week, Yingling said.
“He never used the term bank in any pejorative sense,” he said. “He used it in a factual sense.”
“It was clear that they realized that they need to differentiate between banks and Wall Street activities,” he said.
Reuters set to spotlight financial regulation in DC
The fight over new rules that will dramatically change Wall Street and financial markets is approaching the finish line in Washington, with both lawmakers and the financial industry making last-ditch efforts to put their stamp on the reform effort. Reuters will be hearing from the key players in the debate on April 26-29 during the 2010 Global Financial Regulation Summit.
Top regulators, watchdogs, lawmakers and stakeholders will provide their perspectives on how this landmark legislation will impact banks, investors, traders and consumers. The talks will focus in on proposals for a strong new consumer agency, strict oversight of derivatives and attempts to end the perception that some financial firms are “too big to fail.”
Reuters set to spotlight financial regulation in DC
The fight over new rules that will dramatically change Wall Street and financial markets is approaching the finish line in Washington, with both lawmakers and the financial industry making last-ditch efforts to put their stamp on the reform effort. Reuters will be hearing from the key players in the debate on April 26-29 during the 2010 Reuters Global Financial Regulation Summit.
Top regulators, watchdogs, lawmakers and stakeholders will provide their perspectives on how this landmark legislation will impact banks, investors, traders and consumers. The talks will focus in on proposals for a strong new consumer agency, strict oversight of derivatives and attempts to end the perception that some financial firms are “too big to fail.”
Reuters set to spotlight financial regulation in DC
The fight over new rules that will dramatically change Wall Street and financial markets is approaching the finish line in Washington, with both lawmakers and the financial industry making last-ditch efforts to put their stamp on the reform effort. Reuters will be hearing from the key players in the debate on April 26-29 during the 2010 Reuters Global Financial Regulation Summit.
Top regulators, watchdogs, lawmakers and stakeholders will provide their perspectives on how this landmark legislation will impact banks, investors, traders and consumers. The talks will focus in on proposals for a strong new consumer agency, strict oversight of derivatives and attempts to end the perception that some financial firms are “too big to fail.”
There are a few questions I have about blaming Wall Street for the financial mess and the need for regulation:
Was not the financial catastrophe caused because lending standards were lowered by banks? Is not the Federal government supposed to oversee these laws so that this doesn’t happen? If lending standards were not lowered there would be no subprime mortgages and securities created based on them would have no problems. By 2008 Fannie and Freddie, which are govt. sponsored enterprises, owned directly or indirectly 5.1 trillion in residential mortgages which is about half of the entire US mortgage market. A big mandate of Fannie and Freddie was to give loans to people who had lower incomes (52% by 2005).
Also, the rating agencies were giving AAA ratings to securities based on these subprime mortgages. Whose job is it to make sure these agencies are doing their job properly? Is it not the govt.?
Based on this did the govt. not create this whole atmosphere of irresponsible lending? How can you blame Wall Street for selling securities based on these mortgages when it was the govt. that was either promoting or looking the other way when millions of these subprime mortgages were being created by banks?
For example: in the 19th century there were a lot of monopolies. Would one say that capitalism is bad because it leads to monopolies or would one say that the govt. needs to create proper laws to deal with this, i.e. anti-trust laws which took care of the problem? Another example: let’s say that the govt. suddenly becomes very lax on enforcing pharmaceutical laws and as a result all kinds of bogus drugs and elixirs come into the market seriously affecting the health of a large number of consumers. Would you say that this is a failure of capitalism or would you blame the govt. for not doing its job?
If the govt. ensures that banks follow proper lending standards and rating agencies don’t give bogus ratings isn’t the problem solved? What is the rest of the regulation all about? After all, there is nothing inherently wrong with securitization of mortgages or with selling credit default swaps that are just insurance for these mortgage based securities.
Does capitalism not work wonderfully if it is encapsulated within the right laws that are enforced properly and create a level playing field? Do you think the govt. is blaming capitalism for its own failures?
Washington divided, more trouble ahead for Obama?
Washington insiders say that not since the 1890′s have the people that represent the U.S. been so divided. From Gay rights to Afghanistan lawmakers are at polar opposites on issues that are on the Obama administration’s agenda. What’s next? And, what’s likely to get the green light or the stop sign?
Who are all those Thought Police that are forcing all those people to watch Fox instead of the preferred liberal networks? Seems that the folks are voting their preference with their remote controls. The ratings are the proof.
The liberal networks, especially MSNBC, have gotten so out of touch with mainstream America that the viewers have no interest in such a one sided opinion. It’s simply the marketplace at work by choice, in spite of what President Obama and his minions would like us to believe. Fox does not control the viewer, the viewer chooses Fox.
