I’m always worried about simple step solutions. What’s your take?
Click Here To Read: Banking Fix Made Easy With Six Simple Steps
Introduction (via Bloomberg)
Financial reform seems to be flailing. Legislation has been proposed, but it is complicated and diffuse. Most of the proposed fixes are incremental changes that don’t seem likely to prevent a future bubble.
The House and Senate are squabbling over which federal agency should take the lead in supervising banks. The administration, as well as the Congress, have fallen into the trap of trying to fix everything. Instead, they should agree on the most important remedies.
The crash exposed six serious problems:(via Bloomberg)
No. 1: Mortgage regulation was too lax and in some cases nonexistent.
No. 2: Capital requirements for banks were too low.
No. 3: Trading in derivatives such as credit default swaps posed giant, unseen risks.
No. 4: Credit ratings on structured securities such as collateralized-debt obligations were deeply flawed.
No. 5: Bankers were moved to take on risk by excessive pay packages.
No. 6: The government’s response to the crash also created, or exacerbated, moral hazard. Markets now expect that big banks won’t be allowed to fail, weakening the incentives of investors to discipline big banks and keep them from piling up too many risky assets again. It’s time to end too big to fail by making it less palatable for banks to remain big.
Click Here To Read: Banking Fix Made Easy With Six Simple Steps
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