A Thing of Beauty

4 Comments

1. Super-Duper site! I am loving it!! Will come back again – taking your feeds also, Thanks.

2. Catherine,

   Do you have a resource page on your website
   on how to find out the “inside baseball” on
   how the money is working in one’s community?

   Thanks,
   James

3. Dear Catherine: Here are the 20 recommendations from the March 23rd WSJ FUTURE OF FINANCE INITIATIVE:
   1 STRENGTHEN UNDERWRITING STANDARDS
   Bank management and bank examiners must
   enforce the banks’ minimum underwriting standards,
   focused on the borrowers’ ability to repay
   debt from income. Extend supervisors’ authority
   beyond banks to mortgage brokers and other
   bank agents. Ensure national real-estate appraisal
   standards.
   2 BOLSTER FDIC
   Bolster the Federal Deposit Insurance Corp.
   and provide it with additional funds and flexibility
   so there is capacity to handle escalating bank
   failures.
   3 REGULATORY OVERHAUL
   Streamline the regulatory architecture so there
   is more effective and consistent regulation across
   financial services and an end to regulatory arbitrage.
   Improve effectiveness of regulators. Provide
   them with better training, pay, status and resources.
   Specific industry experience desirable. Testing,
   licensing and continuing education required.
   4 CREATE A NEW CLEARINGHOUSE
   Create a clearinghouse to enhance transparency
   for standardized credit-default-swap contracts,
   including individual corporate names and
   indexes. The clearinghouse would also extend to
   overnight financing and interest-rate swaps.
   5 RAISE CAPITAL REQUIREMENTS
   Writers of credit-default swaps should face
   higher capital (reserve or margin) requirements.
   Banks heavily involved in the CDS market should
   face a further surcharge for concentration risk.
   6 ENHANCE COLLATERAL
   Enhance collateral requirements on over-thecounter
   derivatives to protect the system. To minimize
   the effects of financial-institution failure,
   regulators should segregate customer collateral in
   the event of a bankruptcy by a firm involved in
   the credit-default-swap market.
   7 SMARTER SECURITIZATION
   Improve disclosure in securitization, improve
   underwriting standards, require all parties in the
   process to have “skin in the game.” Create meaningful
   standards for transparency of financial
   flows in all instruments, and make the information
   available in an easily accessed form.
   8 RATING-AGENCY REFORM
   Eliminate special status of rating agencies. Reform
   pay structure for rating agencies to align incentives
   better so they are paid over time as their
   ratings prove to be accurate.
   9 CONSISTENT REGULATORY SYSTEM
   Include nonbank financial institutions under
   regulatory umbrella and require them to provide
   information to the systemic regulator. Regulation
   should be risk-based. Firm-specific information
   should be private, and only aggregate information
   made public.
   10 CONSTRAIN LEVERAGE
   Limit leverage across large, systemically important
   financial institutions, and enhance capital
   requirements for certain products. Be clear about
   how risk gets measured for purposes of leverage
   and capital requirements.
   11 LET TARP CAPITAL BE REPAID
   Make regulators explicitly state conditions
   for the repayment of money to the Troubled Asset
   Relief Program.
   12 EXECUTIVE COMPENSATION
   Limit the government role in executive compensation
   to companies where the government
   has a stake. Companies should be sure executive
   compensation provides the right set of incentives.
   13 TRANSPARENCY BEFORE REGULATION
   Systemic risk regulator should require all
   firms first to provide information. Regulation
   should be limited to those deemed to pose a systemic
   risk. Intermediaries with sufficiently long
   investor lock-ups and sufficiently low leverage relative
   to risk should be granted a safe harbor from
   regulation. Regulator should publicly disclose
   cross-industry liquidity and concentration risk.
   14 PRICE AND VOLUME TRANSPARENCY
   The industry should publish price and volume
   data on over-the-counter derivatives.
   15 FED SHOULD BE SYSTEMIC RISK REGULATOR
   The Federal Reserve should be the systemic
   risk regulator of nonbank financial institutions. It
   is important that the regulator be independent
   and apolitical. We recommend using private-sector
   advisory bodies. In order to take on these responsibilities,
   the Fed may have to reallocate
   some responsibilities to other agencies.
   16 ENSURE SUCCESS OF PUBLIC-PRIVATE
   PARTNERSHIPS
   To improve the chances that the Public-Private Investment
   Program works, the government should
   recognize that many sellers of these assets are reluctant
   because of the impact on their balance
   sheet, and should allow for regulatory forbearance
   on capital requirements or accounting flexibility.
   17 ACCOUNTING RULES
   Have a sensible set of accounting rules to reflect
   value for financial reporting and capital
   purposes.
   18 NEW RESOLUTION AUTHORITY FOR
   NONBANKS
   Create an FDIC-like model for winding down nonbank
   financial institutions that pose system risk.
   Adopt global standards for determining how different
   classes of creditors are treated.
   19 AUDITORS ENFORCE CONSISTENT MARKS
   Encourage disclosure of disparate asset
   marks, by asking auditors to raise instances of
   price discrepancies among clients.
   20 LIMIT FORECLOSURES
   More efforts to limit foreclosures through interest
   and principal reductions, rent-to-own and
   other creative solutions. Create a new federal
   agency with sufficient resources to limit foreclosures.
   Force banks to identify potential troubled
   borrowers.
   A Call to Action
   Here are the top 20 principles for rebuilding the financial system,
   as developed by participants in The Wall Street Journal Future of Finance Initiative.

4. Dear Catherine: Even though it took a few days I found the site of the March 23rd & 24th WSJ Conference called THE FUTURE OF FINANCE INITIATIVE. Here are the 20 recommendations

   Recommendations.pdf (25KB)

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