He’s got an axe and he’s rather keen to use it

Andrew Pegler – 02 July 2010

Is it a bird, is it a plane? No it’s a President, he spells of BO and he’s taking an axe to Wall Street! Ya thoughts?

While our national interest may have been Wayneing at the recent G20 conference (a gab fest for the world’s largest 20 economies), Barack O went with a stated purpose – a need to quash greed. After an all-nighter the US Congress emerged in time to hand BO the Wall Street “reform” bill on his way to the airport. Its authors hope it will rein in what they regard as the lack of oversight and accountability that led Wall Street up excrement creek and took the rest of us with it.

The reason I think the bill will be of great interest to UBankers is because bits of it will probably get a guernsey here. The bill is sweeping in scope, which, considering BO has got enough US public support to kill an elephant, is not surprising. Highlights include:

  • a new consumer-protection bureau with powers to write rules for and ban financial products.
  • credit-rating agencies to be more legally accountable for their mistakes. I.e. we can sue them when they lead us astray like they did by issuing AAA ratings to subprime stinkers.
  • a limit on how much banks can investment in hedge funds (investment partnership set up by a money manager).
  • a limit on how much banks can invest in private equity firms (firms whose shares are held privately and not traded on the stock exchange).
  • a limit on proprietary trading by banks (when banks trade shares etc. for themselves).
  • the government can break up any failing financial firm, not just banks, and hit the surviving competitors with the mop-up costs rather than the long-suffering taxpayer.
  • banks that securitise assets (i.e. mortgage-backed securities) will have to retain more of the risk.
  • derivatives markets will no longer be left to just do their own thing.

Reactions? Free marketeers abhor the idea of government getting involved in free enterprise while a lot of people are saying “it’s about time, those Wall Street b@$(@rds got it in the neck!” But what do you lot think?

And in other news… the land of the long white ETS! New Zealand had a woman prime minister 13 years before us, and it’s just pipped us again, this time on the ETS front. NZ greenhouse gas emissions are amongst the highest in the developed world and the new NZ ETS is central to efforts to reduce this belch. Needless to say farmers are not happy but the chardonnay/lentil coalition are over the moon. Keep an eye out folks as I expect there will be much to glean.

As always I welcome your feedback and any ideas for subjects I can tackle. So go on, let us know what’s on your mind – log in and post your comments below.