How to end panics and impose market discipline

How to end panics and impose market discipline

By William Isaac and Richard Kovacevich

The US has suffered three severe financial crises in the past 40 years, each driven by excessive risk taking, particularly in real estate. Regulators had plenty of authority to rein in the abuses but failed to do so. This is partly because the US regulatory system is fragmented and politicised and the Dodd-Frank financial reform law made it worse. But even if we had the ideal regulatory structure, we could not rely on regulation alone to control excesses in the financial industry that too often lead to crises.
To end the boom-bust cycles and accompanying panics, we do need smarter, more effective and less politicised regulation – but it is also critically important to impose stronger marketplace discipline on financial institutions, particularly the largest that were previously regarded as too big to fail.

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Why reform of House of Lords is a botch

By Martin Wolf

To what question is the right answer “let’s have more elected politicians”? Apparently, it is: how should the UK reform the House of Lords? But this is a foolish answer. A huge amount of effort is about to be devoted to an ill-conceived reform.
Start by asking the purpose of a second chamber of parliament. I can identify three possible answers: to house different interests from those represented in the first chamber; to introduce a different kind of expertise; or to make legislation both harder to pass and more considered than it would otherwise be.
Any second chamber worth its salt must achieve the last of these aims. It must mitigate the “electoral dictatorship”. On this, it seems, one finds no disagreement. Yet a choice remains between the other two aims. Historically, the House of Lords represented different interests from those of the House of Commons: those of the territorial magnates. That had become absurd by the late 19th century, let alone the late 20th.

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Danger in Xi’s rebuff to Obama

By Philip Stephens

When Xi Jinping tipped up at the White House recently Barack Obama made a proposal. The president said they both had an interest in setting up a serious dialogue between the US and Chinese armed forces. Mr Xi, who expects to be China’s president by this time next year, did not take long to think about the idea. His response was blunt: No.

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Brazil declares new ‘currency war’

By Samantha Pearson in São Paulo

Brazil has declared a fresh “currency war” on the US and Europe, extending a tax on foreign borrowings and threatening further capital controls in an effort to protect the country’s struggling manufacturers.
Guido Mantega, the finance minister who was the first to use the controversial term in 2010, said the government would not “sit by passively” as developed nations continue to pursue expansionary monetary policies at the expense of Brazil.

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Mitt Romney dodges a bullet

The Republican race

But the narrowness of his victory in Michigan portends a long struggle ahead

| NOVI, MICHIGAN, COLUMBUS, OHIO, AND NASHVILLE, TENNESSEE |

ON FEBRUARY 28th a trickle of Democrats arrived to vote in Michigan’s Republican primary, as permitted under the state’s primary rules. They came to defeat the presumed Republican front-runner, Mr Romney. Democrats see him as the most dangerous opponent to Barack Obama, and relished the chance to promote Rick Santorum, a social conservative whom they think would be a lot easier to beat. In what became quite a nasty contest, with plenty of mudslinging all round, Mr Santorum encouraged the ruse.

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