EconomicCrisis.US

The debate over financial services reform has meandered for weeks without a clear sense of urgency. It would be a huge opportunity lost if our political, regulatory and business leaders cannot craft a credible new regulatory foundation for one of America’s pre-eminent industries. It’s time to set politics and regulatory infighting aside and establish the new rules of the road for this critically important business.

Several principles should guide reform. Our country needs to strive for transparency in financial-company balance sheets and recognize the direct correlation between clarity in asset value and how financial enterprises are valued by investors. Mark-to-market based accounting must be revitalized, and complex instruments and securities must be subject to regular market-valuation tests whenever possible.
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Sooner or later, the Financial Crisis Inquiry Commission, created by Congress to investigate the causes of the recent and ongoing financial crisis, will no doubt examine the technical aspect of the financial collapse — low interest rates, credit default swaps, derivatives, cheap mortgages that ballooned and other factors that almost wrecked the global economy.

Probably among the many things the commission members will not do, however, is read “The Origins of Totalitarianism,” the 1951 book by the German-born political theorist Hannah Arendt, which at first glance would seem to be utterly detached from a crisis that took place more than three decades after the author’s death.
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The Obama administration scored its first financial regulation reform victory in months on Thursday when a U.S. congressional committee approved new rules for over-the-counter derivatives.

In a 43-26 decision, the House of Representatives Financial Services Committee voted in favor of slapping new rules on the largely unpoliced $450-trillion OTC derivatives market, widely blamed for amplifying last year’s financial crisis.

The committee’s bill strives to balance a desire to curb speculative market excess with preserving the market’s useful role in helping corporations hedge against operational risks.
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The first major criminal trial against top Wall Street execs involved in the financial crisis kicked off in New York yesterday. Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin are accused of misleading investors in a desperate attempt to stop them from abandoning the funds, even as they themselves yanked their money out and admitted the subprime market is “toast” in personal emails. The collapse of the fund cost investors $1.6 billion.

“These two defendants lied to their investors to save their multimillion-dollar bonuses,” an assistant US attorney told jurors. “In the United States of America that’s a crime and it’s called securities fraud.” The pair—who face up to 20 years in jail if convicted—are accused of chicanery during the financial crisis but not of actually causing it, the Independent notes, although that distinction may matter little to jurors likely to be hungry for payback after the economic misery of the last two years. “This is not a revenge opportunity,” the judge cautioned them.
By Rob Quinn – newser.com