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Volcker and Lewitt Drop Bombs on Financial Regulatory Reform

Posted by Larry Doyle on July 12, 2010 11:28 AM |

Will financial regulatory reform truly change the Wall Street landscape and insure that America never again experiences the economic crisis of the last few years? While we will likely see a number of our political operatives at 1600 Pennsylvania Avenue and on Capitol Hill waving flags and banging drums when the reform measures are inevitably passed, let’s listen to some political and financial insiders who have a different take.

Paul Volcker, former Fed chairman and current White House economic adviser, is clearly looking to clear his name prior to the passage of this reform. He spoke at length in an article released by The New York Times, Volcker Pushes for Reform, Regretting Past Silence.  Paul dropped the following bomb: 

When it comes to interpreting the financial legislation, Mr. Volcker says he remains less than impressed. “We have to have a regulatory system that reflects today’s problems and tomorrow’s potential problems,” he says. “This bill attempts to do that. Does it do it perfectly? Obviously it does not go as far as I felt it should go.”

In a similar vein, the Financial Times addresses the upcoming financial regulatory reform in an article this morning. The FT’s John Plender writes, Tackling Anti-Social Financial Behavior:

On the topic of shareholder democracy, corporate governance and anti-social behaviour, I cannot do better than quote Michael Lewitt of Harch Capital Management on Dodd-Frank: “The financial reform bill that is emerging from Congress leaves so much essential work undone, and is so obviously a sell-out to special interests and expensive Wall Street lobbying efforts, that it can only be considered the latest example of all that is wrong with the American political system. In addition to leaving untouched the single biggest threat to financial stability – naked credit default swaps – it also fails to address the bleeding ulcers of Fannie Mae and Freddie Mac, ignores the deficiencies of the rating agencies and leaves most of the details of financial reform to be filled in by regulators, whose record in effectively doing their jobs is, to put it more politely than it deserves, pathetic.”

Mr Lewitt was prescient about the financial crisis. For my money, he is also on the mark here.

I would concur. We should not get overly comfortable thinking this reform as drafted will necessarily prevent another crisis.

Navigate accordingly.

LD

  • We run the AITEC series of Banking & Mobile Money conferences across Africa. Next year our dates are Nairobi in March, Accra in May and Johannesburg in September. We would welcome presentations that alert African bankers to these issues that are threatening the international banking system – with advice on how Africa’s banking industry can best avoid these threats.
    Regards
    Sean Moroney

  • Mike

    I think Volcker would’ve let them have it 10x worse if he could really speak what was on his mind, Lewitt hits the nail on the head.

    There are dumb citizens who were excited about the health care bill, but I don’t even know any dumb people that have an opinion on this bill. I think the only relevant part is the limiting of ATM fees?? Worthless. Thank goodness Dodd is retiring, it would be an atrocity if Barney is voted back in.






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