Dodd-Frank: A critical assessment. Viral Acharya, Thomas F Cooley, Matthew Richardson, Richard Sylla, Ingo Walter, 24 November 2010 As the world leaders gathered at the G20 summit to discuss how to bring the global imbalances into check, an equally important question has arisen. How to deal with the potential bubbles that might be caused by the highly accommodative monetary policies in the Western economies? Easy money could flow from the West into "emerging" economies, potentially chasing yield there and fuelling asset price bubbles. If that happens and when those bubbles burst, we may again end up with a significant solvency shock to the financial sectors in the West. With fragile or at least stretched government balance-sheets, the best option governments and regulators have to reduce such risks may well be financial stability.
One issue the G20 must continue to address is how to reconcile the various national policies with the goal of global financial stability. This column provides a summary of some of the highlights. The Empire strikes back. The role of financial institutions in the global crisis has led to a consensus that financial regulation must change. This column argues that the banking lobby, far from depleted, has struck back with a vengeance. It has managed to postpone the much needed regulation for a time when the need for it will be forgotten. There are two remarkable aspects of the consensus around international financial regulation emerging in the run up to the November G20 meeting in Seoul.
The first is that there is a consensus. International regulators are agreed that banks must set aside much more capital for risky assets; be less dependent on the whims of money markets; constrain the maturity mismatches between their assets and liabilities and set aside capital for holding complex derivatives where there may be settlement and clearing risks. They also agree that capital adequacy should move counter to the economic cycle and that banks should not be “too big to fail”. This is simpler than it sounds. The Price of Crisis Prevention. Exit from comment view mode.
Click to hide this space BRUSSELS – Two years have passed since the financial crises erupted, and we have only started to realize how costly it is likely to be. Andrew Haldane of the Bank of England estimates that the present value of the corresponding losses in future output could well reach 100% of world GDP. This estimate may look astonishingly high, but it is relatively conservative, as it assumes that only one-quarter of the initial shock will result in permanently lower output. According to the true doomsayers, who believe that most, if not all, of the shock will have a permanent impact on output, the total loss could be two or three times higher.
One year of world GDP amounts to $60 trillion, which corresponds to about five centuries of official development assistance or, to be even more concrete, 10 billion classrooms in African villages. So much for the long term. But uncertainties abound. Où en est la réforme bancaire. Voici trois ans que la grande crise bancaire s’est mise en route et deux ans qu’elle a explosé. La vraie surprise est la lenteur avec laquelle les responsables politiques avancent pour prendre les mesures que réclame la dure leçon de ces événements. Deux étapes viennent d’être franchies, l’une superficielle au niveau de l’Union européenne, l’autre plus fondamentale au niveau international. Jusqu'à quel point les gouvernements ont-ils résisté à l'intense lobbying des banques ? Au moment de la grande crise bancaire, qui s’est déroulée entre août 2007 et septembre 2008, tous les responsables politiques se sont succédé devant les micros pour promettre « plus jamais ça ». Cet été, le Président Obama a fini par faire passer un programme assez complet, même si la plupart des économistes le trouvent un peu court.
À écouter les responsables politiques, le chemin parcouru en Europe est considérable. Pourquoi les dirigeants européens se laissent-ils ainsi manipuler ? . . . © Telos.