Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

The banking crisis of the new millennium - why it was inevitable

By Carolyn Currie - posted Friday, 31 July 2009


But just as the 2003 SEC proposals to control hedge funds (registering Investment Advisors, introduction of standards on valuation and fees, limiting general solicitation in fund, monitoring capital introduction services provided by brokers) were never followed up, it is obvious that needed reforms to the US financial system will be lobbied against.

There is obviously an urgent need to review not only why the SEC was ignored in its recommendations for investors’ advisors, but also why the Federal Reserve did not object to state governments supervising mortgage originators and the writers of credit default swaps such as AIG. Other urgent questions need to be answered in order to be able to reform the US regulatory model.

Why was the number of regulatory bodies which allowed regulatory arbitrage never reviewed and integrated supervisors established such as in Canada, Europe, Australia and the UK? Why also was Basel II lobbied against when it would have brought to an abrupt standstill the excessive concentration on mortgage lending in the US financial system? Why was the banking industry but not the real estate industry allowed to deregulate. Why has the US never completely complied with money laundering rules? Why has the accounting standard of mark to market (FAS 157) never been reviewed when it allowed both incredible write ups and disastrous write downs.

Advertisement

The list is endless but there is a blatant need to redesign the US regulatory model from scratch. So how this should be done? A detailed method is described by the author in a 2005 publication. In essence this involves assessing the existing system in terms of inputs and outputs given constraining factors and then considering changes not only in terms of the regulatory model and its components, but also in terms of the existing human expertise and how it is motivated. Note the dysfunctional effect of incorrectly designed executive compensation was one of the conclusions by Bank of England studies in 1998 and by the author in the same year.

Urgent to such a redesign is a reconsideration of the legal infrastructure, government goals and starting economic resources. Just as Australia found a flawed federal system responsible for regulatory black holes, so too should the new US government re-examine its entire regulatory model to evolve a model that will never again bring the world financial system to the brink of a total implosion with disastrous effects on emerging nations attempting their own reforms.

  1. Pages:
  2. 1
  3. Page 2
  4. All


Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

2 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Dr Carolyn Currie is the Managing Director of Public Private Sector Partnerships Pty Ltd.

Other articles by this Author

All articles by Carolyn Currie

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Article Tools
Comment 2 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy