« How to Find the Owner of Your Mortgage | Main | Resolution Authority: Safe Harbors »

The President on Financial Reform

posted by Stephen Lubben

I had the honor of being invited to the President's speech on financial reform this morning at Cooper IMG_0717 Union. The speech was somewhat general, but that is probably to be expected when talking for a short time about a complex issue and a massive chunk of legislation.

(N.B.  I'm writing this up before looking at any of the press coverage so I can present my impressions "untainted" by the conventional wisdom.)

Two important points that I was glad to hear. First, he noted that resolution authority could be paid for ex ante or ex post, and people could legitimately disagree over which was better, but you needed to find a way to make sure the financial industry paid for its own resolution. I think this is right, and reflects the realistic options. I know some suggest we can simply put the big financial firms into bankruptcy without doing anything more, but if Paulson and Bush couldn't stomach that (after one attempt), I don't know who could. The broader consequences of that intellectually pure approach will never be politically palatable.

Second, he refused to demonize derivatives, which would have been the easy political move. He explained that there are legitimate uses for derivatives, but the real issue was bringing transparency to the market, so it would be clear to all if somebody like AIG went off the deep end in terms of counterparty risk and exposure.

The one thing I would have liked to have seen was some support for the safe harbor reforms now percolating through Congress, such as Senator Bill Nelson's proposal. This amendment is not perfect, and I've explained what I think works as a compromise position, but amendments of this sort are a big step in the right direction, and get the issue on the table.

TrackBack

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8341cf9b753ef0134800f0abd970c

Listed below are links to weblogs that reference The President on Financial Reform:

Comments

The comments to this entry are closed.

Contributors

Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.

News Feed

Categories

Bankr-L

  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

OTHER STUFF

Powered by TypePad