Sunday, January 31, 2010
'We need to face up to needed structural changes'
Paul Volcker makes his case for financial reform. It’s persuasive. It’s also encouraging that he advocates, repeatedly, the need for comprehensive international agreements, something I mentioned the other week. The big global banks have to be on a level competitive playing field. Global competition is the primary reason, or at least the stated reason, why so many Wall Street firms originally went public and why they pushed for repeal of the Glass-Steagall Act in the late 1990s. A global agreement limiting the functions of large financial firms would theoretically remove that global-competition argument. …
Harvard’s Niall Ferguson and UB’s Laura Tyson warn that breaking up “too big to fail” banks is too simplistic and not enough. Ferguson even says the financial crisis really wasn’t caused by banks being too large. OK, let’s concede that point. But are we or are we not now bailing out the banks considered “too big to fail”? Volcker argues regulating future bank actions – such as risky securities investments – isn’t good enough. History shows Wall Street and regulators have a short memory and rules get changed, he says. The best “fail-safe” method is breaking up banks – and regulating them, he says.
Paul Volcker makes his case for financial reform. It’s persuasive. It’s also encouraging that he advocates, repeatedly, the need for comprehensive international agreements, something I mentioned the other week. The big global banks have to be on a level competitive playing field. Global competition is the primary reason, or at least the stated reason, why so many Wall Street firms originally went public and why they pushed for repeal of the Glass-Steagall Act in the late 1990s. A global agreement limiting the functions of large financial firms would theoretically remove that global-competition argument. …
Harvard’s Niall Ferguson and UB’s Laura Tyson warn that breaking up “too big to fail” banks is too simplistic and not enough. Ferguson even says the financial crisis really wasn’t caused by banks being too large. OK, let’s concede that point. But are we or are we not now bailing out the banks considered “too big to fail”? Volcker argues regulating future bank actions – such as risky securities investments – isn’t good enough. History shows Wall Street and regulators have a short memory and rules get changed, he says. The best “fail-safe” method is breaking up banks – and regulating them, he says.
