At a time when the Ministry of Finance of the U.S. refueled Bob Rubin and Larry Summers, and financial crises were considered to be the lot of developing countries, organizations applying for the title of international government, love of the need to reflect the reorganization of the global financial architecture. " The first trial on the nib architectural assignment was agreement Basle II (Note Profinance.ru: a document entitled "International convergence of capital measurement and capital standards: the new approaches developed by the Basel Committee on Banking Supervision), the so-called standard system for assessing the adequacy of bank capital taking into account the baseline risk. Banks are quickly adjusted and easy movement of the hands of all risky assets are removed from the balance sheets.
What's next?
Last week, newly architects of the Obama administration decided that it was time to go back to the drawing board and create a draft of a new regulatory system for financial institutions. However, the project is not without controversy. One of them - is the creation of a body regulating systemic risk, giving Fedrezerva powers necessary to control all financial companies, not just on the banks, the size, extent of the use of borrowed funds and interdependence which, in the case kollapasa may pose a threat to stability financial system. In other words, it is anticipated that the guys, promorgavshie approaching the heaviest crisis since the Great Depression, or at least did nothing to prevent it, exactly, all bound and sure will be able to predict the next. Well, well. But this is not the most interesting. Rather than get rid of the doctrine of "too big to fall", which inadvertently encouraged by the availability of state support, the plan of Obama gives her a clear formulation expands and gives legal status. "All of us, important for the stability of the system will be subjected to more rigorous monitoring by the regulatory authorities", - said Peter Uollison, former Chief Adviser to the Ministry of Finance and senior researcher at the American Enterprise Institute (American Enterprise Institute). "What does this mean? This means that they are too big to allow them to collapse."
Previously, companies were divided into too big and not too big to fall, depending on the preferences of those who gave an evaluation: a process reminiscent of guesses. Last year, the federal government in such a way nagadalo luck Fannie Mae and Freddie Mac, 19-ty's largest banks, the two car giants, and one insurance company to include them in members' club is too big. " "We should cease to think in terms of" too big to fall ", - said Allan Meltzer, professor of political economy at Carnegie pittsburgskom University (Carnegie Mellon University)." This concept enhances the system where bankers profit and the state loses. We need to shift the responsibility on the shoulders of bankers. "However, the amount will not be the only condition for obtaining a release from risk. Published last week, a document, the so-called White Book, explains the provisions of the standard, under which must, among other things, fall, and too dependent borrowed funds, and too interconnected companies. The problem is that nowhere, either in one of the 88 pages of this work is not given a clear definition of "too".
Wrong diagnosis
Companies that will be declared "too big", will be able to borrow at low interest, using their advantage to destroy the small-scale credit institutions. Not surprisingly, small banks have expressed their outrage over the plan, which, indeed, is a delayed-action bomb that can "destroy the competition in every corner of the economy, which is" too big "," - added Uollison. Some economists have criticized Obama prepared the document "New foundations: Building a new financial regulation and supervision" over the lack of solid foundation. Based on the analysis conducted by the Administration, it is possible to think that the crisis arose because of the lack of regulation for a number of companies ", - writes Arnold Kling, a member of the Working Group on Financial Markets at the University of George Mason (George Mason University). Meanwhile, holders of risky debt securities subject to regulation and supervision. In particular, it relates to Fannie Mae, Freddie Mac and banks. They have committed thoughtless and risky transactions just under the nose of the controlling bodies. Before you assign a treatment plan is needed to properly diagnose. Without this, any attempt to change the regulation of the financial system will have a political flavor that can only exacerbate the situation.
The White Paper changes color
According to Meltzer, another weak point plan Obama - is the inability to resolve the issue with the parastatal entities Fannie Mae and Freddie Mac. "We will try and close the Fannie Mae and Freddie Mac, even if the Congress will include the amount of compensation to the budget." Well, if Congress wants to fund the purchase of housing for people with low income - good. Only let this compensation in the budget will be transparent. In addition to the establishment of a regulatory body for control of systemic risk, the plan involves the abolition of authority to supervise the theft, the creation of the agency to protect consumers from unscrupulous lending practices, the regulation of OTC derivatives and the abolition of authority Fed as lender of last resort. The agencies issuing debt securities and carrying out sekyuritizatsiyu should remain at 5% of the combined pool of assets. It is anticipated that this will stimulate a more cautious approach. "I would have increased this proportion to 20%," - said Paul O'Neill, the Minister of Finance in the Bush administration - he has set a mandatory initial payment for any mortgage is not less than 20% - of the past era. "Why not make sure to save the financial system from similar problems in the future? Especially given the fact that the American economy to its knees just have too aderraytinga free standard mortgages?
Answer: Because it's unpopular policy measure.
According to an article published in the Wall Street Journal earlier this week, some politicians have already turned to Fannie and Freddie with a request to weaken lending standards for mortgages to purchase housing in new apartment houses. Chairman of the Committee on Financial Services Congress, Barney Frank, a representative of the Democratic Party of Massachusetts and former proponent of the creation of parastatals, wrote a letter to the executive directors of both companies, urging them to ease the recent tightening of lending conditions. You can imagine where all this will lead, but there Kongerss not yet been adopted for the detailed study of the White Paper!
What's next?
Last week, newly architects of the Obama administration decided that it was time to go back to the drawing board and create a draft of a new regulatory system for financial institutions. However, the project is not without controversy. One of them - is the creation of a body regulating systemic risk, giving Fedrezerva powers necessary to control all financial companies, not just on the banks, the size, extent of the use of borrowed funds and interdependence which, in the case kollapasa may pose a threat to stability financial system. In other words, it is anticipated that the guys, promorgavshie approaching the heaviest crisis since the Great Depression, or at least did nothing to prevent it, exactly, all bound and sure will be able to predict the next. Well, well. But this is not the most interesting. Rather than get rid of the doctrine of "too big to fall", which inadvertently encouraged by the availability of state support, the plan of Obama gives her a clear formulation expands and gives legal status. "All of us, important for the stability of the system will be subjected to more rigorous monitoring by the regulatory authorities", - said Peter Uollison, former Chief Adviser to the Ministry of Finance and senior researcher at the American Enterprise Institute (American Enterprise Institute). "What does this mean? This means that they are too big to allow them to collapse."
Previously, companies were divided into too big and not too big to fall, depending on the preferences of those who gave an evaluation: a process reminiscent of guesses. Last year, the federal government in such a way nagadalo luck Fannie Mae and Freddie Mac, 19-ty's largest banks, the two car giants, and one insurance company to include them in members' club is too big. " "We should cease to think in terms of" too big to fall ", - said Allan Meltzer, professor of political economy at Carnegie pittsburgskom University (Carnegie Mellon University)." This concept enhances the system where bankers profit and the state loses. We need to shift the responsibility on the shoulders of bankers. "However, the amount will not be the only condition for obtaining a release from risk. Published last week, a document, the so-called White Book, explains the provisions of the standard, under which must, among other things, fall, and too dependent borrowed funds, and too interconnected companies. The problem is that nowhere, either in one of the 88 pages of this work is not given a clear definition of "too".
Wrong diagnosis
Companies that will be declared "too big", will be able to borrow at low interest, using their advantage to destroy the small-scale credit institutions. Not surprisingly, small banks have expressed their outrage over the plan, which, indeed, is a delayed-action bomb that can "destroy the competition in every corner of the economy, which is" too big "," - added Uollison. Some economists have criticized Obama prepared the document "New foundations: Building a new financial regulation and supervision" over the lack of solid foundation. Based on the analysis conducted by the Administration, it is possible to think that the crisis arose because of the lack of regulation for a number of companies ", - writes Arnold Kling, a member of the Working Group on Financial Markets at the University of George Mason (George Mason University). Meanwhile, holders of risky debt securities subject to regulation and supervision. In particular, it relates to Fannie Mae, Freddie Mac and banks. They have committed thoughtless and risky transactions just under the nose of the controlling bodies. Before you assign a treatment plan is needed to properly diagnose. Without this, any attempt to change the regulation of the financial system will have a political flavor that can only exacerbate the situation.
The White Paper changes color
According to Meltzer, another weak point plan Obama - is the inability to resolve the issue with the parastatal entities Fannie Mae and Freddie Mac. "We will try and close the Fannie Mae and Freddie Mac, even if the Congress will include the amount of compensation to the budget." Well, if Congress wants to fund the purchase of housing for people with low income - good. Only let this compensation in the budget will be transparent. In addition to the establishment of a regulatory body for control of systemic risk, the plan involves the abolition of authority to supervise the theft, the creation of the agency to protect consumers from unscrupulous lending practices, the regulation of OTC derivatives and the abolition of authority Fed as lender of last resort. The agencies issuing debt securities and carrying out sekyuritizatsiyu should remain at 5% of the combined pool of assets. It is anticipated that this will stimulate a more cautious approach. "I would have increased this proportion to 20%," - said Paul O'Neill, the Minister of Finance in the Bush administration - he has set a mandatory initial payment for any mortgage is not less than 20% - of the past era. "Why not make sure to save the financial system from similar problems in the future? Especially given the fact that the American economy to its knees just have too aderraytinga free standard mortgages?
Answer: Because it's unpopular policy measure.
According to an article published in the Wall Street Journal earlier this week, some politicians have already turned to Fannie and Freddie with a request to weaken lending standards for mortgages to purchase housing in new apartment houses. Chairman of the Committee on Financial Services Congress, Barney Frank, a representative of the Democratic Party of Massachusetts and former proponent of the creation of parastatals, wrote a letter to the executive directors of both companies, urging them to ease the recent tightening of lending conditions. You can imagine where all this will lead, but there Kongerss not yet been adopted for the detailed study of the White Paper!
Caroline Baum
Bloomberg
Bloomberg
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