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Volcker’s anti-Geithner, anti-Summers World Tour

Posted By Barry Ritholtz On December 15, 2009 @ 9:00 am In Bailouts,Credit,Really, really bad calls,Regulation | Comments Disabled

“Bankers and regulators have not come anywhere close to responding with necessary vigor” to the worst economic crisis in 70 years. There is a lot of evidence that financial weaknesses brought us to the brink of a great depression . . . The proposed changes are like a dimple.”

-Paul A. Volcker, Dec. 8. at a conference in West Sussex, England.

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That paraphrased quote above comes to us from none other than Tall Paul on his five country, eight week, Bankers Shame lecture series. The Bloomberg article its from (Regulators Resist Volcker Wandering Warning of Too-Big-to-Fail [1]) extensively reviews the anti-Geithner, anti-Summers World Tour.

Even thought this is obvious, it still needs to be repeated:

“Two years after the start of the deepest recession since the 1930s, no U.S. or European authority has put in force a single measure that would transform the financial system, based on data compiled by Bloomberg. No rule- or law-making body is actively considering the automatic dismantling of banks that Volcker told Congress are sheltered by access to an implicit safety net.

There’s little evidence that policy makers are heeding Volcker, the former chairman of the U.S. Federal Reserve. More than 50 regulatory overhaul proposals have been submitted in the U.S. and Europe, the data compiled by Bloomberg show. Lawmakers and regulators have debated new rules for capitalization and leverage, central clearing for derivatives trading, oversight of hedge funds and ways to monitor systemic risk.

While the U.S. House of Representatives has approved a financial regulation bill, authorities in the U.S. and Europe have sidelined measures that would automatically force changes in the structure of financial companies that Bank of England Governor Mervyn King called “too important to fail.” Volcker is leading a chorus arguing for restricting the size or primary functions of financial institutions.”

Of all the critics out there on this issue, none is more important, accurate and credible (present company included) than Volcker. He is The Man on these issues: Make banks smaller, make them accountable, don’t engage in moral hazard, do not reward reckless speculation. If they are too big to fail, then they are too big.

If the President were nearly as smart as advertised. he would jettison the dynamic duo in favor of Volcker’s prescriptions. He is the only politician/banker who is not afraid to prescribe foul tatsing but effective medicine . . .

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Source:
Regulators Resist Volcker Wandering Warning of Too-Big-to-Fail [1]
Gadi Dechter and Alan Katz
Bloomberg, Dec. 15 2009

http://www.bloomberg.com/apps/news?pid=20601109&sid=aDbxsIHM30H8&pos=11


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URL to article: http://www.ritholtz.com/blog/2009/12/volckers-anti-geithner-anti-summers-world-tour/

URLs in this post:

[1] Regulators Resist Volcker Wandering Warning of Too-Big-to-Fail: http://www.bloomberg.com/apps/news?pid=20601109&sid=aDbxsIHM30H8&pos=11

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