BBC news 2009-06-18 加文本

BBC 2009-06-18


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I’m Mike Johnson with World Business News from the BBC. The United States government has announced plans to overhaul financial regulation. The idea is to prevent another banking crisis. But is President Obama’s medicine what America really needs? New doubts about the health of the big banks have depressed shares on Wall Street and have some of world’s poorest people stand to lose out as migrant workers send less money home.

Workers who were at the construction companies, those were the first people who stopped sending money to their homes.

All the details coming up...

The most fundamental reform of US financial regulation since the Great Depression. But that at least is how President Obama has been selling his plan to rewrite Wall Street’s rulebook. The Central Bank will be given new powers to supervise and regulate large financial firms. Banks will have to keep more money in reserve in case things go wrong. There’ll be more scrutiny of hedge funds, derivates and complex investments based on debt. And there’ll be a new consumer protection agency to regulate mortgages and credit cards.

The proposal is expected to get a bumpy ride through Congress. And they got mixed reactions from bankers we spoke to on Wall Street.

I think that we definitely need regulation over products and strategies that were not regulated in the past. Firms did not have strong risk management systems in place. If there was not a regulatory seam around in before, I think there should be in the future.

The last thing in the world that the market needs is another regulator. I think they should take the existing regulation structure, and they should figure out where there are gaps and I think they should close those gaps before they had another agency to the regret.

Financial terms, well, I prefer free-flowing capital in the field, hurts people in some places. It’s always temporary.

The view from New York. For Harvard University economist professor Jeffrey Miron, the reforms would increase bureaucracy but do little to reduce risks.

A lot bit appears to me to be cosmetic, changing some requirements in ways that banks and other financial institutions will fairly easily innovate around the void. So I think a lot of it is political window dressing more than a substantial reform. And I bet if you went back and look at previous announcements about financial regulation, whether 1999 or even back into the 30s, we would hear exactly the same sorts of statements. So crucially, you need to be able to, be willing to enforce the rules that you have. And for example, the SEC was warned about Bernie Madoff back in 1999, didn’t do anything about it. So unless that will is there, I don’t think the changes in the rules of the powers are really very significant here.

So what would you have done? I mean, would you, for example, many people have been calling for the world financial system to be dismantled and rebuilt for banks not to be allowed to take risk. Rather than this, I understand if these proposals simply have to pay more to take risk. You’d gone for something more fundamental, would you?

I would have. Now, it’s a risk sounds a bit knotty, my review is that probably the best we can do is actually no regulation at all. Whenever we create one set of regulations, we create incentive for banks and other companies to get around those regulations. And that sometimes is exactly what sows the seeds of the disasters that we have seen in recent months. Maybe…

But you can’t be serious about no regulation at all? Can you I mean there is not just gonna lead to the law of the jungle, these banks going down even quicker than they actually did?

I am serious in the sense that there would be a fundamentally different attitude by consumers, by financial institutions and everyone else. If there were no regulation, and I think we will be in very different set of institutions out there. There will be institutions that were basically lock-boxes, they were glorified mattresses. For consumers, they simply want someplace safe to hold their cash. And then there will be things that would be more like hedge funds. And the hedge funds is relatively well through all these, for people who didn’t want to take significant risk. But all that will be very clear. There would be no pretence that somehow we banish risks for the markets. And I think that would lead to on average better decision making. And only those people who can afford to take real risks actually taking those risk.