Showcase Panel III: Regulation of Financial Institutions
Saturday, Nov. 14
9:00 a.m. – 10:30 a.m.
– Hon. Paul S. Atkins, Congressional Oversight Panel and Former U.S. SEC Commissioner
– Ms. Stephanie R. Breslow, Partner, Schulte, Roth & Zabel LLP
– Dean Paul G. Mahoney, David and Mary Harrison Distinguished Professor of Law, Arnold H. Leon Professor of Law, University of Virginia School of Law
– Hon. Annette L. Nazareth, Partner, Davis Polk & Wardwell LLP
– Moderator: Hon. Edith H. Jones, U.S. Court of Appeals, Fifth Circuit
The real way to fix financial institutions:
Judge Jones, quoting Reagan:
“If it moves, tax it. If it moves too fast, regulate it. If it stops moving, subsidize it.”
Insufficient or lax regulation was not the cause of financial crisis. Crisis due to mistake in monetary policy. Collapse of tech stops, 9/11, Enron, Feds reduced short-run interest rates.
Taylor rule could be used to predict changes in short-term rates.But feds continued to ease and kept lowering it. At the same time house prices increased dramatically.
Whenever there are long-term short interest rates in high inflation, people will want to buy at short-term rates in hope of quick appreciation and quick profit. Adjustable rate mortgages accomplished this.
1. Failure of Consumer Protection- banks tricked customers by offering low teaser rates. But when short term rates unusually low, people wanted to borrow short in order to borrow long. Why were banks so easy to make the loan?
2. Repeal of Glass Steagle by GLB, allowed banks to affiliate with investment firms. Doesn’t explain why commercial and investment banks got into trouble.
3. Executive compensation focus on short term.
More, after the jump.
Discussing Hedge funds. Hedge funds are just market participants. There are some rules limited to hedge funds.
Being registered does not uncover fraud. Madoff was registered.