Nouriel Roubini: Financial Reforms 'Cosmetic,' Won't Stop More Crises

CNBC:

Current efforts to reform financial regulation are "cosmetic" and won't prevent another crisis, economist Nouriel Roubini told an audience on Tuesday at the London School of Economics.

"The way I think about this crisis is not in terms of black swans (a sudden, rare event), but white swan events," Roubini said. "Crises are much more common than we think."

Read the whole story: CNBC

Comments

[gerald4]

01:36 PM on 05/20/2010

Maybe all of the recently created new financial products, and similar new toxic asset products created by the master financial geniuses that created various derivative and other junk bond type freshly printed paper securities out of the thin air should require a separate application and a separate license granted by the SEC for the creation, existence and/or sale of each and/or any new financial product. Maybe the SEC should grant license only to those that have intrinsic collateral value, are easily understood, are transparent, forthright, and are not deceptive in their sworn financial statements filed with the SEC. Maybe the SEC should also require a study to justify the need and define the value of any new derivative type instrument created, similar to an Environmental Impact Statement. When the financial risks are several layers or completely removed from the title to the actual asset that has some actual collateral value (like a Mortgage, Bond, Stock Share, Promissory note), and this instrument is insured from most of the investment risk, how much due diligence will an investor perform before he will commit to purchase, as compared to the investing into a primary mortgage or similar instrument that is collateralized for the event of failure?

If I were driving a car without insurance, I would probably drive more carefully than if I had insurance since my exposure for loss is lessened with insurance.

[ThomastonPaine]

01:04 PM on 05/20/2010

Senators please resist the temptation to move to closure without fixing this ineffectual and potentially damaging bill. The grave import of the issues before you demand your attention. If you must stay past Memorial Day to responsibly deal with issues that could again bring the world to the brink then so be it. You must get this bill right.

Pass a functionally independent Consumer Financial Protection Agency
Pass the Volcker Rule and end proprietary trading.
(Increase Capital Requirements)
Restore The Firewall of Glass Steagall
Pass Responsible and Effective Regulation of Derivatives--transparency--clearinghouses
(Investor protections)
Work To Ensure Rating Agency Accuracy...end "issuer pays" business model.
End Off Shore Exemptions
End “Naked” Credit Default Swaps--Legitimate Hedging is Good but these are wholly negative speculative instruments
End “Naked” Short Selling
Pass a Windfall Profits Tax On Wall Street
Responsibly Address "Black Box—High Frequency Trading"
End Unconscionable Payday lending abuses (usury caps on excessive interest)
Effectively End Too Big To Fail. (Kaufman Plan)
*Work to reform Fannie and Freddie
*Work to improve underwriting standards.

Key Exclusions in the Dodd Bill:
http://big.assets.huffingtonpost.com/DoddExemptions.pdf
Arthur Delaney
“K Street Carve Outs: Financial Industry Lobbyists Find Gaps in Dodd Bill”
http://www.huffingtonpost.com/2010/04/20/k-street-carve-outs-finan_n_544133.html”

Contact Elected Officials easily at: http://www.usa.gov/Contact/Elected.shtml

2 Additional Excellent Sources of Information Regarding Lobbying and Moneyed Interests:
OpenSecrets.org
MapLight.org

[gerald4]

11:59 AM on 05/20/2010

How can anybody believe that the US government will be able to continuously borrow back enough of the US dollars (that US citizens paid foreigners to make our imported US consumer goods) back from China, India, Pakistan, Brazil and the other foreign industrial nations to forever pay for US wars, government bureaucrat payrolls, state and local payrolls, police, courts, firefighters, job stimulation spending, pay US citizens for digging holes today and then re-filling the same holes tomorrow, pork barrel projects, free educations, subsidized housing, humanities, art, music, writing poems, entertainment, wars, social entitlements, welfare, healthcare, environmental clean-ups, all sorts of other make-work schemes, and/or similar things that do not contribute positively to our foreign trade balance?

Maybe the US government should hire Jeff Skilling, Bernard Madoff, Scott Rothstein, Eddie Fastow, and Sir Allen Sanford plus some of the lesser known Wall Street Master Criminals and financial wizards as consultants to advise the US treasury department and the Federal Reserve Board concerning "How to operate a Ponzi Scheme"! These gentlemen might be the best qualified individuals in the USA with the specialized knowledge and skills required to run the US Treasury department.

[gerald4]

12:08 PM on 05/20/2010

I do not know why economists believe that National (Sovereign) Debt as a percentage of Gross National Product has anything to do with the ability of that particular nation to repay their National Debt. What if the majority of the GNP activity was tax funded government payrolls, state and local tax funded payrolls, unemployment benefits, welfare, retirement pensions, providing free medical, housing, social services, police, firefighters and other tax funded jobs that do not produce any national wealth that the nation could use to repay National (Sovereign) Debt, or any of the food, shelter, or clothing needed to sustain life.

Real wealth, jobs, industry, and real monetary value is created and/or acquired ONLY when the members of a family (or a nation, city-state, island, tribe, etc.) plant, grow and/or harvest something of commercial value from the earth, extract something of commercial value from the earth, provide professional services (medical, legal, dental, engineering, architecture, accounting, land surveying, technology, etc.) and/or manufactures or constructs something of commercial value that is consumable (or permanently useful for income or rent) and then sells, leases or rents these items and/or services to parties outside of their family, in return for a net transfer of gold, currency or commodities from other parties outside of their family into their own family. That family can reflect their real wealth and financial security with their net positive accumulation of grain, gold, cattle, jewels, land, buildings, factories, commodities and/or other marketable assets.

[SnickDiesel]

09:26 AM on 05/20/2010

NR makes sense. That is what scares me about the future. He talks sense and the folks in charge don't.

[Brandon Broze]

09:08 AM on 05/20/2010

Imagine "reforming TBTF" ACTUALLY meant that- by NOT bailing them out and showing some restraint. Instead, the libs have this distorted uneconomic view that it means BREAKING UP THE BANKS and ending banking economies of scale- where all the innovation and magic occurs. Think about it: Do you REALLY want the entire country to have a bunch of community banks that only do the bare minimum?

[PhilipTaylor]

05:36 AM on 05/20/2010

Thanks for telling us something we already know!

THIS IS D0DD CHIT!

[PhilipTaylor]

05:37 AM on 05/20/2010

REFORM? - WHAT REFORM?

1. No TRUE INDEPENDENT Regulated Derivatives Market!
2. STILL BIG-ENOUGH-TO-SKEW-US
3. STILL HIDDEN DERIVATIVES FEES from Clients - SIPHONED-OFF FOR $10 Million to $100 MILLION BONUSES and even BIGGER INCOMES!
4. RISK DUMPING STILL ALLOWED ON TAXPAYER! STILL $650 TRILLION TO DUMP!
5. BANKSTER PAID CR00KED SENATORS work to MAKE LOOPHOLES!
6. STILL CDSs to BET AGAINST YOUR OWN CLIENTS
7. STILL “FRONT RUNNING” at the SPEED OF LIGHT using INSIDER INFO to G0LDMAN+JPM+Other Market-MAKERS/STEALERS!
8. STILL BANKSTER OWNED MARKETS LIKE ICE and DTCC SCAMS!
9. FAKED Transparency/Oversight or NONE! As markets are as CR00KED as BANKSTERS
10. STILL CR00KEDIST SENATOR D0DD+SECOND CR00KEDIST SHELBY in CHARGE!
11. If Clearinghouse is RUN BY CR00KS then WHAT REFORM?
12. “Market-Maker SCAM” Still ALLOWED where INSIDER-TRADING IS AUTOMATED!
13. Maybe some Capital Requirements
14. PROVEN Incompetent and BANKSTER OWNED FED is MAJOR REGULATOR - BANKSTERS REGULATING BANKSTERS!
15. STILL D1MON and G0LDMAN Reps can get ADVANCED INTEREST RATE SIGNALS FROM FED MONTHS EARLY TO CHEAT - While the REST of us ARE CHEATED!
16. FED may be in CHARGE OF Consumer Financial Protection - LIKE PED0PHILES in charge of CHILDCARE!
17. STILL HIDDEN FEES IN CUSTOMIZED DERIVATIVES - JPM was PROSECUTED SUCCESSFULLY for this in SEVERAL COURT DECISIONS in PA and AL.
18. Little or No Penalties for VIOLATING REGULATIONS! NO Wall Street FINANCIAL CEO has ever been PROSECUTED IN THE HISTORY OF THE USA!

[PhilipTaylor]

05:45 AM on 05/20/2010

19. Bill "does not prohibit the use of uncleared swaps--even more egregious, states no swap can be voided for failure to clear." If a swaps contract does not trade via a clearinghouse there's no penalty!
20. BIGGEST Futures Commission Merchants are owned by BIGGEST banks! CR00KS HANDLING CR00KS' CR00KED DEALS!
21. TRANSPARENCY= WALL STREET CAN NOT HIDE FRAUDULENT FEES and DEALS! BANKSTER Solution NO TRANSPARENCY!
22. Swap rejected will then trade "under cover of darkness.”
23. Kirstin Brost, Senate spokeswoman, said bill calls for "serious penalties" - CFTC "CAN" levy fines up to "triple monetary gain" on persons violating regulation and "CAN" suspend/revoke a bank's registration, or bring criminal charges. Depends on who is in charge!
24. Gensler appears as GOOD GUY among 0BAMA'S BAD GUYS - A DECOY!
25. Estimates by BIS -- if all open OTC derivatives contracts were closed out at prevailing market prices, they'd be worth $21.6 Trillion - But $650 Trillion EXIST!
26. 5 BANKSTERS DOMINATE MARKET: JPM+BofA+G0LDMAN+CITI+M0RGAN = Total Assets of 97% of all USA BANKING SYSTEM, holding $8.6 Trillion in assets or 60% of GDP! So 3% of USA is SAFE!
27. Lincoln is the SHAM SENATE GOOD GUY to help her WIN her Election as WALL STREET wants this BANKSTER PAWN to Continue!
28. Amendment: Explicit authorization to evade clearing – establishes a perverse incentive for clearinghouses to be even more discriminatory in accepting swaps for clearing. NO PENALTIES!

[Republitarian]

06:22 PM on 05/19/2010

Shh...Nouriel, liberals want their feel-good, do-nothing regulations, that only succeed in making it more expensive to do business in America. Only inputs matter, not outputs.

Good forbid the congressional Dems actually knew what they were doing, let alone approached all of this in a serious, sober adult way.

[WIpatriot]

01:47 AM on 05/20/2010

Just say NO ~ Nancy

[Republitarian]

02:28 AM on 05/20/2010

So you have to go back to a Republican first lady 25 years ago? For a catch-phrase that didn't cost anything?

Fail.

[DiogenesOfAlaska]

06:20 PM on 05/19/2010

I very strongly agree with the assessment of the TBTF firms.

But I'd like to make the case in even more stark terms, in such terms as even Dr. Doom may not dare to pronounce:

the problem is one of determining why anybody trusts the risk management capabilities of TBTF firms.

The reason this problem is a real berserk one is because it DOES challenge the prevailing order.

Hence it's not a good idea to go too far with it.

But it's a perfectly good moment in history to have second thoughts about how to find INDEPENDENT validation of risk management and leadership skills.

That's because these are not times in history when it's terribly accomodating to claim the market has always already sorted it all out.

The market may just have been a lazy bitch. You gotta factor that possibility into the equation.

[verycold]

05:57 PM on 05/19/2010

We have been headed off a cliff since the 70s. If we had taken the oil crisis then seriously by investing in alternative energy and getting mass transit up and running in our big cities, and also tightened lending so that real estate bubbles didn't keep percolating and erupting, things would be very different. As it is, it really is too late. The train is going to hit the station no matter how many patches we attach to our fiscal policies.

We aren't ready for the decline either. My ancestors came to the US on a crowded boat from Ireland with 10 kids. One child died coming over. Can you imagine the physical fortitude it took to make that trip and then start over with a huge family in a strange land. They had a hard life and frankly the US population isn't made of that stuff anymore. What will take us down is our inability to make personal sacrifices for the good of the whole. Our government has promised us what they CANNOT deliver and many refuse to see that reality.

[MyTake]

07:03 PM on 05/19/2010

Way too much good logic here.......good post.

[binksmom85]

07:06 PM on 05/19/2010

Actually, there are people in this nation with plenty of fortitude, and the minority in Congress who are not bought off; there are plans to reduce payments to the wealthiest under Social Security; the Medicare cuts to docs were a big mistake.
Our problem is forty years of GOP and banksters deregulation of the financial marketplace and business that was driven by a warped ideology. So much of that ideology is so ingrained in people now they think it is sacrosanct, and it is not. Couple that ideology with the Bush tax cuts for the wealthiest, Bush DOUBLED military spending, and the banksters are in the Obama administration, the financial problems cannot and should not be laid at the feet of the average working stiff! The financial elites broke it, and it needs to be fixed before they finish bankrupting the nation. The unrest in Greece can easily be spread over here.
The Great Depression was really 3 declines in a short period, with none of the regulations that
eventually were put in place by FDR. We actually have the governmental and financial infrastructure in place to return to normalcy, but the financial ideology that is still holding sway, and will through reform 'ultralight', just about guarantees we will have another Great Depression. The ideology is the fundamental problem; that it has given kingly sums to many is the reason it will not die quietly. Obama needs to replace his entire financial advice crew, otherwise, he needs to be replaced.