Fresh Ideas From Leading Thinkers For True Financial Reform
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What will it take to fix the nation's broken financial system? If anyone really knows for sure, it's the great minds gathering in New York for a conference tomorrow morning.
"It's been 18 months since the worst financial crisis since the Great Depression, and we felt it was appropriate to bring a range of thinkers -- from financiers to industry professionals, academics and former regulators -- to develop a concrete plan to restore the integrity of the U.S. financial markets," said Erica Payne, a senior adviser to the Roosevelt Institute.
The Institute's "Make Markets Be Markets" conference will feature presentations from luminaries like Harvard Law Professor and bailout watchdog Elizabeth Warren and a discussion between Nobel laureate economist Joseph Stiglitz and legendary investors George Soros and Jim Chanos, among others.
"The structure of our current financial markets does not reflect the critical market principles that once allowed our economy to flourish -- principles like transparency, competition, and free flow of information," writes Rob Johnson, a senior fellow and director at Roosevelt, in the Institute's new report. "And it has not been subject to the most important principle of all -- the opportunity for market participants to fail.
"We all know the result. Financial sector CEOs have relied on taxpayer support. They have benefited from express taxpayer bailouts as well as secret 'back door' deals. They continue to lead companies that seem to make profit but actually only thrive because of government subsidies and taxpayer support," Johnson writes.
From 8-11 ET Wednesday morning, Johnson and others will detail "a concrete plan for a financial system that can manage the flow of capital, price risk appropriately, reduce fraud and collusion, protect taxpayers, and provide liquidity -- all without compromising innovation or stability."
Reform topics to be addressed include the credit rating agencies; Fannie Mae and Freddie Mac; the frozen securitization market; accounting gimmicks that allow banks to mask their liabilities; derivatives; and ending Too Big To Fail.
"We want to draw a line in the sand between what is happening, and what should be happening," Payne said. The gap between the two, Payne said, is "sizeable."
"This seems to be a great moment to be putting out a set of ideas that lay out baseline conditions about what financial reform should look like," said Andrew Rich, president and CEO of the Roosevelt Institute.
An example would be an independent consumer-focused agency dedicated to protecting borrowers from abusive lenders. The current system doesn't do enough to protect consumers, reformers say.
"The lack of meaningful rules over the consumer credit market is the direct result of a sluggish, bureaucratic regulatory system," Warren writes in her report. "Today, consumer protection authority is scattered among seven federal agencies. Each of those agencies has plenty of workers on payroll and plenty of budgeting. But not one of those agencies has real accountability for making consumer protection work, and, as a result, not one has been successful at doing so."
Warren wants a new Consumer Financial Protection Agency, solely charged with protecting consumers, "giving families a fighting chance against the lawyers and resources of the Wall Street banks," she writes.
As Johnson put it: "Our government leaders have shown little capacity to fix the flaws in our market system. Admittedly the issues involved are complex, even for finance professionals. Yet the complexity of the subject is no reason to defer to those who cloak themselves in a mantle of expertise in order to clandestinely advance their gross self-interest."
More information on the conference and the participants' proposals can be found on its website, www.makemarketsbemarkets.org.
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First Posted: 05/02/10 06:12 AM ET Updated: 05/25/11 04:40 PM ET