Geithner Running Point on Reform

Although healthcare reform seemed to be pushing ahead of financial reform in the political dialogue race, President Obama's Lehman Anniversary speech on Wall Street last week seems to have re-energized the movement somewhat. While GlobalRiskJobs and Risk Talent Associates are definitely seeing an increase in activity on the financial risk and compliance front, we definitely expected more to see more robust signs of recovery on the hiring front at this point in the year. One of the preconditions to a wholesale shift has always been a more intense regulatory/reporting environment, which we still believe will come, but things have been slow to develop largely because of the traffic jam in Washington. So, with Geithner's focus now moving from crisis manager to running the point on financial reform, we will see where it takes us. Geithner seems to have simplified the message, focusing on three key points that legislators should consider when enacting financial reform: 1) offer “substantial” new protections to consumers and investors, 2) make the financial system less vulnerable to crisis, and 3) protect taxpayers from having to bail out future crises.

Are some of the regulators past the point of fixing? Bloomberg commentator Susan Antilla wonders as much about the SEC in a recent piece. She looks at Judge Rakoff's beat-down of the SEC-Bank of America settlement as just the latest example of a regulator that needs an overhaul. Meanwhile, the SEC is seeking more power to oversee derivatives markets.

GlobalRiskBlog favorite Andy Kessler weighs in on bank pay controls in today's Wall Street Journal. Kessler argues that it was excessive leverage, rather than excessive risk that drove the financial system to the brink of disaster.

As the G-20 convenes in Pittsburgh, U.S. and European leaders remain divided on how much capital the world's largest financial institutions should keep on hand to meet unexpected losses. Most agree that a major lesson of the Crisis is that higher capital requirements are essential, and G-20 leaders hope to have an agreement on new standards by the end of 2010, with implementation by the end of 2012.

Congress has turned its attention to the Rating Agencies. New allegations by a recently departed Moody's analyst named Eric Kolchinsky have added fuel to the debate over the role and influence of credit ratings and whether recent reforms are sufficient to prevent a repeat of past missteps.

The FDIC is being criticized for its handling of many of the recent bank failures. A recent report about the failure of Colorado-based New Frontier Bank criticizes the agency and other regulators for not being aggressive enough in handling the brewing financial crisis.

And finally, the controversial filmmaker Michael Moore is back in the headlines with "Capitalism: A Love Story", a scathing look at the financial system through the lens of the Crisis.