Reshaping financial regulation
Thursday, 17 September 2009
Fazle Rashid
Jed Rakoff, a federal judge, in Manhattan, New York last Monday declared void an agreement between the Securities Exchange Commission and Bank of America on the latter's take-over of Merrill Lynch. The judge issued a stern rebuke not for the financial institutions but for their regulators as well.
Judge Rakoff handed down the verdict almost at the same time President Barack Hossain Obama sternly admonished the financial industry and the lawmakers and asked them to accept his proposals to reshape financial regulation to protect the nation from a repeat of excesses that wrecked havoc on the global economy.
Judge Rakoff refused to approve a $33 million deal that would have settled a lawsuit filed by the SEC against Bank of America. The lawsuit alleged that bank failed to adequately disclose the bonuses that were paid by Merrill Lynch before the merger, the New York Times (NYT) in a front page report said. The judge accused the SEC of failing in its role as Wall Street top cop by going too easy on one the biggest banks it regulates. And President Obama chastised the Wall Street saying instead of learning the lesson of the Lehman Brothers and the crisis from which "we are still recovering , they are choosing to ignore them. They do so not just at their own peril but at our nations," the NYT quoted the president as saying.
Amid polls showing growing taxpayer alarm about rising government debt and deficits, almost every White house initiative is now couched in the language of fiscal responsibility, an analyst said.
There is a global consensus that some kind of regulations are required to rein in the financial institution from indulging in recklessness. The issue will dominate the coming Group of Twenty (G20) summit billed for Pittsburgh at the end of the month. The prospect of the global economy making a turn around before the end of 2010 is dim, the experts said.
European governments are at risk of recording even higher budget deficits this year than was anticipated four months before, the European Commission (EC) warned. The deficits in the 27-nation EU could be above 6.0 per cent of the gross domestic product (GDP). The analysts believe that the most savage recession in EU's 52 history will inflict a lasting damages on bloc's public finances and long term economic growth. The public debt in EU will soar to 77 per cent of the GDP. The figure could inflate as high as 105 per cent. A startling revelation has been made by an International Panel of Economists led by the US Nobel prize winner Joseph Stiglitz that the gross domestic product does not accurately indicate the health of the economy because it does not take into account public services or home based activities. GDP also includes spending on prisons and security systems
Meanwhile, the Institute of International Finance (IIF) urged G20 leaders to set up task force to tackle global economic imbalances which could re-emerge quickly in the recovery, sowing seeds of future crisis and instability. IIF called for the creation of global bankruptcy regime for international financial institutions that would have authorities to manage a collapsing institution.
The world has not tackled the problems at the heart of the economic downturn and is likely to slip back in recession, said William White, former chief economist of Bank for International Settlement (BIS). He said government actions to help the economy in the short term might be sowing the seeds of future crisis. White was among handful of economists who had warned about the current meltdown.
In a separate development, BBC could privatise BBC worldwide, its commercial arm and retain only a minority stake as low as 20 per cent, a reputed paper reported.
Jed Rakoff, a federal judge, in Manhattan, New York last Monday declared void an agreement between the Securities Exchange Commission and Bank of America on the latter's take-over of Merrill Lynch. The judge issued a stern rebuke not for the financial institutions but for their regulators as well.
Judge Rakoff handed down the verdict almost at the same time President Barack Hossain Obama sternly admonished the financial industry and the lawmakers and asked them to accept his proposals to reshape financial regulation to protect the nation from a repeat of excesses that wrecked havoc on the global economy.
Judge Rakoff refused to approve a $33 million deal that would have settled a lawsuit filed by the SEC against Bank of America. The lawsuit alleged that bank failed to adequately disclose the bonuses that were paid by Merrill Lynch before the merger, the New York Times (NYT) in a front page report said. The judge accused the SEC of failing in its role as Wall Street top cop by going too easy on one the biggest banks it regulates. And President Obama chastised the Wall Street saying instead of learning the lesson of the Lehman Brothers and the crisis from which "we are still recovering , they are choosing to ignore them. They do so not just at their own peril but at our nations," the NYT quoted the president as saying.
Amid polls showing growing taxpayer alarm about rising government debt and deficits, almost every White house initiative is now couched in the language of fiscal responsibility, an analyst said.
There is a global consensus that some kind of regulations are required to rein in the financial institution from indulging in recklessness. The issue will dominate the coming Group of Twenty (G20) summit billed for Pittsburgh at the end of the month. The prospect of the global economy making a turn around before the end of 2010 is dim, the experts said.
European governments are at risk of recording even higher budget deficits this year than was anticipated four months before, the European Commission (EC) warned. The deficits in the 27-nation EU could be above 6.0 per cent of the gross domestic product (GDP). The analysts believe that the most savage recession in EU's 52 history will inflict a lasting damages on bloc's public finances and long term economic growth. The public debt in EU will soar to 77 per cent of the GDP. The figure could inflate as high as 105 per cent. A startling revelation has been made by an International Panel of Economists led by the US Nobel prize winner Joseph Stiglitz that the gross domestic product does not accurately indicate the health of the economy because it does not take into account public services or home based activities. GDP also includes spending on prisons and security systems
Meanwhile, the Institute of International Finance (IIF) urged G20 leaders to set up task force to tackle global economic imbalances which could re-emerge quickly in the recovery, sowing seeds of future crisis and instability. IIF called for the creation of global bankruptcy regime for international financial institutions that would have authorities to manage a collapsing institution.
The world has not tackled the problems at the heart of the economic downturn and is likely to slip back in recession, said William White, former chief economist of Bank for International Settlement (BIS). He said government actions to help the economy in the short term might be sowing the seeds of future crisis. White was among handful of economists who had warned about the current meltdown.
In a separate development, BBC could privatise BBC worldwide, its commercial arm and retain only a minority stake as low as 20 per cent, a reputed paper reported.