Main Street

Boning Up on Financial Reform

First, to proffer some informed and informative entertainment, thanks to Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee last night on Countdown With Keith Olbermann:

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And now, in the interest of informing readers on the substantive policy issues involved in financial regulatory reform, we offer the following compendium — and suggest that the reader Bookmark this page for reference.

Paul Krugman suggests reading David Leonhardt’s magazine piece Heading Off the Next Financial Crisis as well as the Roosevelt Institute’s Mike Konczal on how to strengthen the Senate bill.

Meteor Blades at Daily Kos reports on recent Kansas City Federal Reserve President Thomas Hoenig’s comments, and also recommends the National Community Reinvestment Coalition’s call to strengthen the Senate bill. Meteor Blades also notes Barry Ritholtz’s critique of one aspect of Leonhardt’s article:

Thanks to the The Commodity Futures Modernization Act of 2000 (CFMA), the universe of structured derivatives were completely exempt from ALL regulation. Whether it was Collateralized Debt Obligations (CDOs) or Credit Default Swaps (CDSs), the CFMA put them into the world of shadow banking.

How? The CFMA mandated it. No supervision was allowed, no reserve requirements for potential future payouts were mandated, no exchange listing requirements were put into effect, all capital minimums were legally ignored, there was no required disclosures of counter-parties. Derivatives were treated differently from every other financial asset — stocks, bonds, options, futures. They were uniquely unregulated.

Senator Ted Kaufman (D-DE) on the need to separate federally insured banks from risky investment banks, the need to set statutory size and leverage limits on banks and nonbanks, and the need to put in place reforms for derivatives and other qualified financial contracts.

Simon Johnson on the evolving Senate financial reform debate.

The UK’s business secretary Lord Mandelson’s blowback.

The rundown from Demos on the recent Senate Banking Committee’s legislative actions.

Former Labor Secretary Robert Reich on why the SEC should be enforcing the Sarbanes-Oxley Act to hold Wall Street executives accountable right now, instead of waiting for new regulatory reforms.

And finally two awesome compendia.

Tim Fernholz’s Wall Street Cheat Sheet at The American Prospect.

And the Make Markets Be Markets collection of videos and writings from the Roosevelt Institute, which includes presentations by Nobel Prize economist Joseph Stiglitz, Elizabeth Warren on consumer protection, Michael Konczal on a 21st Century Glass-Steagall, and former chief economist for the Senate Banking Committee Robert Johnson on a resolution authority.

Tags: financial regulatory reform