Obama Adviser Paul Volcker Presents Plan to Alter Global Financial System

[DeepModem Mom]

Source: Washington Post

A top economic adviser to the incoming Obama administration unveiled a plan today to radically rethink the global financial system, including a host of measures that would dramatically expand government control over banking and investment in the United States.

The plan -- which recommends limiting the size of banks, setting guidelines for executive pay and regulating hedge funds -- offers the first hint of the kind of changes to the financial system President-elect Barack Obama might push for in the coming weeks and months. Obama has pledged to present a comprehensive series of changes to prevent a repeat of the current financial crisis before world leaders gather in London for a major economic summit in April.

The report today was issued by the Group of 30, an organization of international economists and policy makers. But the recommendations were immediately seen by observers as a building block to an Obama plan because the lead author is Paul Volcker, the former chairman of the Federal Reserve during the Carter and Reagan administrations who will serve as a special Obama White House adviser. Part of Volcker's role is to help mastermind what could ultimately be the biggest overhaul of the U.S. financial system in decades....

The proposal offers 18 major recommendations that would insert government regulators into the board rooms of financial institutions as never before. The plan recommends vastly increased oversight of major banks, going as far as to recommend the end of an era of mega banks whose size makes their failure potentially catastrophic to the global financial system. To limit their size and scope, banks, the document states, should be prohibited from managing hedge funds or private equity funds.

In addition, major mutual funds should be required to operate as commercial banks, subjecting them to stricter government oversight. Those that choose not to comply should be forced to sell only relatively safe financial instruments offering investors low risk, and, most probably, limited room for outsized profits. The document suggests that rating agencies should also face a battery of government regulators....

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2009/01/15/AR2009011501715.html?nav%3Dhcmodule&sub=AR

[PM Martin]

1. YES! The rating agencies need to be regulated.

Just look at all of these banks with AAA ratings. Wachovia? Citigroup? Lehman Brothers? :wtf: They also have a history of putting pressure on the agencies to give them a better rating or else.

[Jambalaya]

9. A Touch of Basel?

Angry Bear: Blame Basel II Dec 13, 2008 ... Blame Basel II. Robert Waldmann gives advice to libertarians, free market fanatics and Republicans on how to blame the financial crisis on ...
angrybear.blogspot.com/2008/12/blame-basel-ii.html - 121k - Cached - Similar pages

Marginal Revolution: Is Basel II to blame? Dec 19, 2008 ... Is Basel II to blame? Robert Waldmann has advice for libertarians:. I'd look into the Lucas critique -- when policy makers assume that an ...
www.marginalrevolution.com/marginalrevolution/2008/12/words-of-wisdom.html - 52k - Cached - Similar pages__________________________


Little has been spoken of the Basel Accords and the effect they had upon rating risk assessment. These two links are quite informative-specifically the commentary sections.

[Yavin4]

10. These Same Ratings Agencies Rate Municipal Debt Much Lower

Therein making local taxpayers pay more in interest. Meanwhile, the banks, who are literally gambling and exposing themselves to massive liabilities, get rated higher and pay less in interest.

This is another example of classism in our society.

[RUMMYisFROSTED]

12. +1

[Kolesar]

11. PBS program "NOW" busted this story wide open on December 26

:fist bump:
http://www.pbs.org/now/shows/446/index.html

What role did the credit rating agencies play in the current economic crisis? This week, a former managing director at Standard & Poor's speaks out on U.S. television for the first time about how he was pressured to compromise standards in a push for profits. Frank Raiter reveals what was really going on behind closed doors at the credit rating agencies the public relies on to evaluate the safety of their investments.

"During this period, profit was primary; analytics were secondary," Raiter tells NOW Senior Correspondent Maria Hinojosa. ( <- Fantastic Journalist )

Who was watching the watchers? Surprising new revelations about the economic debacle, this week on NOW.

[nyc 4 Biden]

2. This sounds good.

The only issue I have is that we trust the regulators under Obama, but how will we feel when (earmuff the kids) a repiglican is back in office and they put their regulators in there? I guess that is the risk we have with all regulation.

[Greyhound]

3. All fair to great suggestions but, like all the plans put forth by economists, it alleviates

the symptoms while ignoring the cause.

We are captive to a debt based system and, as such, is dependent on ever growing debt to thrive. The damn card is maxed out far beyond our ability to repay and even if we can, it leaves the same system in place so that the cycle will repeat.

"Give me control of a nation's money and I care not who makes the laws." - Mayer Amschel Rothschild

"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton

[Mind_your_head]

4. Too true! I would recommend this as its own thread, but I would guess

you wouldn't get many responses.

[Greyhound]

5. Typically 0 - 2. People just don't want to look at what has been going on.

I don't get it, but it cannot be denied. I saw something I believe to be similar when I sold cars, nearly every sucker left the showroom convinced that they got a great deal and it was only the other suckers that got ripped off.

Worse are the people that make their living fleecing the marks and propping up this industry.

(BTW, while I was pretty good at auto sales and made good money, I could not live with making a living that way. There are so many names I remember that I hope I never run into)

I did get a few more responses to an idea for basing currency on time, so at least a few are willing to consider alternatives.
:kick:

[eridani]

6. Let's hope he comes up with Glass-Steagall v. 2.0 n/t

[Zynx]

7. This is precisely why all of those on this board who didn't read anything

Obama's economic picks had been saying lately are going to be routinely positively surprised. On balance, they are good picks, with my only complaint being Larry Summers.

[JerseygirlCT]

8. Yes. And long overdue. nt