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German Bill Limits Search Engines’ Free Access to News

March 1, 2013 by Leave a Comment

The bill, which follows years of debate, came as the newspaper industry in Germany, as elsewhere, struggles to find new sources of revenue as readers and advertisers move online in droves.

Chancellor Angela Merkel’s center-right coalition, which faces an election in September, watered down its original plans amid pressure from Internet lobbyists, lawyers and others who argued that it undermined freedom of information. The opposition parties could still block the bill in the Bundesrat, the upper house of Parliament, where the government has no majority.

Google began an ad campaign in German newspapers and set up a Web site called “Defend your Web” to lobby against the proposals, saying they would result in less information for consumers and higher costs for companies.

The “ancillary copyright” bill now makes clear that search engines can publish “individual words or small snippets of text such as headlines” without incurring any costs.

They would have to pay for use of longer pieces of content, though opposition parties said the wording of the bill was vague and could lead to courts having to rule on individual cases.

“It is not at all clear who is now meant to be protected from whom and why there is this law,” said the opposition Greens on their Web site on Friday, saying the bill served neither cash-hungry publishers nor the free flow of information.

Google echoed such criticism.

“The law is neither necessary nor sensible. It hampers innovation and hurts the economy and Internet users in Germany,” said Kay Oberbeck, communications director at Google.

But the association of German newspaper publishers welcomed the bill as “an important element in the creation of a fair legal space in the digital world.”

They have argued that search engines raise the vast majority of their revenue from online advertising and that a substantial part of this come directly or indirectly from the free access to professional news or entertainment content produced by news media companies.

The German draft bill states explicitly that it is not intended to protect newspapers from the effects of ongoing structural changes in the market.

Article source: http://www.nytimes.com/2013/03/02/technology/german-bill-limits-search-engines-free-access-to-news.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

You’re the Boss Blog: A New Web Site Warns Small-Business Owners of Coming Regulations

February 1, 2013 by Leave a Comment
The Agenda

How small-business issues are shaping politics and policy.

Long concerned that small businesses are over-regulated by the federal government, Republicans in Congress have enlisted business owners to make that case directly to the rule makers.

On Thursday, the G.O.P.-led House Small Business Committee unveiled a Web site, “Small Biz Reg Watch,” that highlights rule-making initiatives undertaken across the federal government that could affect small businesses and provides links so that business owners can read and then comment on the proposals.

“Most small businesses don’t have lawyers or lobbyists who focus on regulatory compliance,” Representative Sam Graves, Republican of Missouri and chairman of the committee, said in a news release that announced the site. “Not all regulations are bad, but many can be unnecessarily burdensome, and it is important that small companies express their concerns before a rule is finalized.”

The Small Business Administration has reported [PDF] that complying with regulations is often more expensive for small companies than their larger competitors. “Any time you can increase awareness among small businesses it’s a good thing,” said Daniel Bosch, manager of regulatory affairs for the National Federation of Independent Business, a small-business lobbying group. Those owners probably will not have the time to comment in as much detail as those who watch regulations for a living, he said, but “they still want their voices to be heard, especially on a proposed regulation that’s going to directly affect their business.”

The Web site debuted with six new rules. Two are a result of the Affordable Care Act, including one related to the so-called employer mandate. Two others are from the Environmental Protection Agency. As comment periods for new rules open, the committee will notify business owners through e-mail and other social media tools, as well as at events legislators hold in their districts around the country. A spokesman for the committee, D.J. Jordan, said that it had gathered 210,000 e-mail address through another interactive Web page it maintains.

Ines Mergel, a professor at Syracuse University who studies how Congress uses the Web and social media to connect with constituents, marveled at the new regulatory Web site. “It’s really remarkable that they’ve set this up and opened up the policy-making process,” she said. “Usually the decision-making process, and all the factors that lead to the final policy, are a black box for the public but also for everybody on the receiving end.” And normally when legislators use the Web or social media, she said, they are not genuinely interested in what their constituents think — “it’s all about me.”

“The question is going to be, how are small-business owners going to find this site,” said Leo Bottary, a vice president of Vistage International, a peer-advisory network for small-business chief executives. “My hope is that they have aggressive plans to make small-business owners aware that the site is available to them. I’ll certainly pass it on to my Vistage owners.

“I have no doubt that this will get used,” Mr. Bottary continued. “It’s much easier than writing a letter to your congressman.”

Like most Republicans, Representative Graves is skeptical of regulation — although Mr. Jordan was quick to point out in an e-mail, “We are not anti-regulation” — but the proposed rules are described in neutral language, and the committee makes no effort to draw attention to any particular part of a proposal or suggest how business owners should view it. “This initiative isn’t intended to manipulate the rule-making process by encouraging small businesses to mirror our viewpoint,” Mr. Jordan said. “We have an idea of how small businesses will view these regulations, and it most likely will be similar to our viewpoint. But sometimes not.”

Mr. Jordan said that the Small Business Committee has no political purpose in mind with the Web site. But Sarah Binder, who watches Congress from her perch as a senior fellow at the Brookings Institution, said the site could help the committee advance its agenda. “It’s very easy to block things in Congress, but it’s much harder to get things done,” she said. The site, she added, “builds and documents a constituency for what the committee wants to do. It makes it more salient for people who might be affected. And they can contact their own members and encourage them to follow up and support whatever comes out of this committee.”

Article source: http://boss.blogs.nytimes.com/2013/02/01/a-new-web-site-warns-small-business-owners-of-coming-regulations/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

DealBook: S.E.C. Pick Is Ex-Prosecutor, in Signal to Wall Street

January 24, 2013 by Leave a Comment

President Obama with Mary Jo White and Richard Cordray.Doug Mills/The New York TimesPresident Obama with Mary Jo White and Richard Cordray.

3:30 p.m. | Updated

President Obama announced Thursday his nomination of Mary Jo White, a former federal prosecutor turned white-collar defense lawyer, to be the next chairwoman of the Securities and Exchange Commission.

In a short ceremony at the White House, Mr. Obama also said he was renominating Richard Cordray as director of the Consumer Financial Protection Bureau, a post Mr. Cordray has held under a temporary recess appointment without Senate approval for the past year. The president portrayed both selections as a way of preventing a financial crash like the one he inherited four years ago.

“It’s not enough to change the law,” Mr. Obama said. “We also need cops on the beat to enforce the law.”

Mr. Obama noted that Ms. White was a childhood fan of “The Hardy Boys,” just as he was. He added that as the United States attorney in New York in the 1990s she “built a career the Hardy Boys could only dream of.”

He noted that she prosecuted money launderers, mobsters and terrorists. “I’d say that’s a pretty good run,” he said. “You don’t want to mess with Mary Jo. As one former S.E.C. chairman said, Mary Jo does not intimidate easily.”

Mr. Obama likewise pressed the Senate to finally confirm Mr. Cordray to the leadership of the consumer agency created by the Wall Street regulation law passed in 2010. The president installed Mr. Cordray as director last January without Senate approval using his recess appointment power, but his term will expire at the end of the year unless he wins approval from the upper chamber of Congress.

“Financial institutions have plenty of lobbyists looking out for their interests,” Mr. Obama said. “The American people need Richard to keep standing up for them. And there’s absolutely no excuse for the Senate to wait any longer to confirm him.”

Ms. White and Mr. Cordray spoke only briefly. Ms. White said if confirmed she would work “to protect investors and to ensure the strength, efficiency and the transparency of our capital markets.” Mr. Cordray said that during his short tenure he has “been focused on making consumer finance markets work better for the American people” and approached it “with open minds, open ears and great determination.”

Regulatory chiefs are often market experts or academics. But Ms. White spent nearly a decade as the United States attorney in New York, the first woman named to this post. Among her prominent cases, she oversaw the prosecution of the mafia boss John Gotti as well as the people responsible for the 1993 World Trade Center bombing. She is now working the other side, defending Wall Street firms and executives as a partner at Debevoise Plimpton.

As the attorney general of Ohio, Mr. Cordray made a name for himself suing Wall Street companies in the wake of the financial crisis. He undertook a series of prominent lawsuits against big names in the finance world, including Bank of America and the American International Group.

The White House expects Ms. White, 65, and Mr. Cordray, 53, to draw on their prosecutorial backgrounds while carrying out a broad regulatory agenda under the Dodd-Frank Act. Congress enacted the law, which mandates a regulatory overhaul, in response to the 2008 financial crisis.

Jay Carney, the White House press secretary, said Ms. White has “an incredibly impressive resume” and that her appointment along with the renomination of Mr. Cordray sends an important signal.

“The president believes that appointment and the renomination he’s making today demonstrate the commitment he has to carrying out Wall Street reform, making sure we have the rules of the road that are necessary and that are being enforced in a way” to avoid a crisis like that of 2008, Mr. Carney said.

Another White House official added that Ms. White and Mr. Cordray will “serve in top enforcement roles” in part so that “Wall Street is held accountable and middle-class Americans never again are harmed by the abuses of a few.”

Ms. White will succeed Elisse B. Walter, a longtime S.E.C. official, who took over as chairwoman after Mary L. Schapiro stepped down as the agency’s leader in December. Mr. Cordray joined the consumer bureau in 2011 as its enforcement director.

The nominations could face a mixed reception in Congress. Republicans had previously vowed to block any candidate for the consumer bureau, leading to the recess appointment. It is unclear whether the White House and Mr. Cordray will face another standoff the second time around.

Mr. Carney argued that there were no substantive objections to Mr. Cordray’s confirmation, only political ones. “He is absolutely the right person for the job,” Mr. Carney said.

Ms. White is expected to receive broader support on Capitol Hill. Senator Charles E. Schumer, a New York Democrat, declared that Ms. White was a “tough-as-nails prosecutor” who “will not shy away from enforcing the laws to ensure that markets operate fairly.”

But she could face questions about her command of arcane financial minutiae. She was a director of the Nasdaq stock market, but has otherwise built her career on the law-and-order side of the securities industry.

People close to the S.E.C. note, however, that her husband, John W. White, is a veteran of the agency. From 2006 through 2008, he was head of the S.E.C.’s division of corporation finance, which oversees public companies’ disclosures and reporting.

Some Democrats also might question her path through the revolving door, in and out of government. While seen as a strong enforcer as a United States attorney, she went on in private practice to defend some of Wall Street’s biggest names, including Kenneth D. Lewis, a former head of Bank of America. She also represented JPMorgan Chase and the board of Morgan Stanley. Last year, the N.F.L. hired her to investigate allegations that the New Orleans Saints carried out a bounty system for hurting opponents.

Consumer advocates generally praised her appointment on Thursday. “Mary Jo White was a tough, smart, no-nonsense, broadly experienced and highly accomplished prosecutor,” said Dennis Kelleher, head of Better Markets, the nonprofit advocacy group. “She knew who the bad guys were, went after them and put them in prison when they broke the law.”

The appointment comes after the departure of Ms. Schapiro, who announced she would step down from the S.E.C. in late 2012. In a four-year tenure, she overhauled the agency after it was blamed for missing the warning signs of the crisis.

Since her exit, Washington and Wall Street have been abuzz with speculation about the next S.E.C. chief. President Obama quickly named Ms. Walter, then a Democratic commissioner at the agency, but her appointment was seen as a short-term solution. It is unclear if she will shift back to the commissioner role if Ms. White is confirmed.

In the wake of Ms. Schapiro’s exit, several other contenders surfaced, including Sallie L. Krawcheck, a longtime Wall Street executive. Richard G. Ketchum, chairman and chief executive of the Financial Industry Regulatory Authority, Wall Street’s internal policing organization, was also briefly mentioned as a long-shot contender.

Kitty Bennett contributed reporting.

Article source: http://dealbook.nytimes.com/2013/01/24/mary-jo-white-to-be-named-new-s-e-c-boss/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Fair Game: A Fed Banker Wants to Break Up Some Banks

December 11, 2011 by Leave a Comment

Happily, though, reducing the perils of gargantuan institutions — and the threat to taxpayers — is an idea that seems to be taking hold in Washington. To be sure, the army arguing for change is far outgunned by the battalions of bankers and lobbyists working to maintain the status quo. But some combatants seeking reform believe they are making headway.

Richard W. Fisher, the president of the Federal Reserve Bank of Dallas, is one. In a speech last month he described, quite colorfully, the problems of these unwieldy institutions and the regulatory ethic “that coddles survival of the fattest rather than promoting survival of the fittest.” Bank regulators should follow the lead of the health authorities battling obesity rates among our population, he said, adding that he favored “an international accord that would break up these institutions into more manageable size.”

This is a banker talking, not a member of the Occupy Wall Street drum circle.

And yet, some have criticized Mr. Fisher for voicing these sensible views — a sign to him that the issue is gaining traction. In an interview last week, he said: “Judging from the anguished calls I received from lobbyists for the megabanks, the ‘attaboy’ calls I am getting from regional and community bankers and the requests for copies of the speech from senators on both sides of the aisle, it appears this is a hot topic.”

That Mr. Fisher has received encouragement from both conservatives and liberals on his views leads him to conclude that “this is an issue that can transcend bipartisan politics.”

Last week, Senator Sherrod Brown, the Ohio Democrat who leads the Senate Banking subcommittee on financial institutions and consumer protection, held a hearing on how to shield Main Street from what he calls megabank risk. In April 2010, he was a co-sponsor of the Safe Banking Act of 2010 with Ted Kaufman, the former Democratic senator from Delaware. The bill, which would break up some of the largest banks by requiring caps on institution size and leverage, ran into a buzz saw of opposition from the usual suspects.

But Mr. Brown soldiers on; he said in an interview on Thursday that he, too, believes the debate is changing. “We’re seeing sentiment grow on the Brown-Kaufman idea,” he said. “We are seeing some people who are pretty conservative here understanding the implicit subsidies these megabanks receive. Our goal is that senators understand this to the point of wanting to take action.”

He said he hoped his hearing would educate colleagues on the significant financial bounties received by big banks that are not allowed to fail, especially their lower borrowing costs — a result of investor belief that taxpayers will rescue them. This places these banks at an unfair advantage over their smaller competitors.

“Why should the Bank of America enjoy an advantage the Peoples Bank in Coldwater, Ohio, doesn’t get?” Mr. Brown asked. “The government’s got to pull away from this and level the playing field.”

Providing testimony at Mr. Brown’s hearing were Sheila Bair, former chairwoman of the Federal Deposit Insurance Corporation; Simon Johnson, a professor at the Sloan School of Management at M.I.T.; Philip L. Swagel, a professor of international economic policy at the University of Maryland School of Public Policy; and Arthur E. Wilmarth Jr., a law professor at George Washington University Law School.

Ms. Bair, one of the few regulators to have fought the anything-goes bailouts during the crisis, espoused her usual no-nonsense perspective on a variety of important topics. “I know that many members of this subcommittee heard the same arguments that I heard during the crisis — that bailouts were necessary or the ‘entire system’ would come down,” she said. “But we never really had good, detailed information about the derivatives counterparties, bond holders and others who we were ultimately benefiting from the bailouts and why they needed protecting.”

Such details are still kept under wraps. Ms. Bair urged the Fed and the F.D.I.C. to write rules requiring banks to report on their interrelationships. That way, distress at one institution can be recognized before it causes crippling losses at another.

In her testimony, Ms. Bair also urged regulators to write rules requiring executives and boards to be “personally accountable for monitoring and compliance” of the institutions they oversee.

When I asked her how this could be done, she said: “There should be personal certifications and, at a minimum, civil penalties assessed by the banking regulators against the boards and management, as well as compensation clawbacks if there are losses to the organization because of proprietary trading. Regulators can’t run these financial institutions for the management.

“What in the world are they being paid for?”

At the moment, they are being paid for taking risks that generate lush bonuses when things go well but that require taxpayer bailouts when the tide turns. Main Street understands that this is wrong and that allowing it to continue is dangerous. It’s past time that Washington did something about it.

Article source: http://feeds.nytimes.com/click.phdo?i=7e3b9f48d38830029ac1644657dd736b

Filed Under: Business News Tagged With: , ,

DealBook: In a Bill, Wall Street Shows Clout

July 5, 2011 by Leave a Comment

Wall Street often tries to play down its influence in Washington. As Congress pushed through financial regulations that seemed to get watered down last year, Wall Street’s chief executives tried to suggest, somewhat surprisingly, that their highly paid lobbyists did not have much sway.

If there is still any question about how much power Wall Street actually has in Washington, here is some fresh evidence worth examining.

In a piece of legislation recently passed by the House and the Senate to revamp patent law, a tiny provision was inserted at the last minute called Section 18.

The provision, which my colleague Edward Wyatt detailed in an article ahead of the House’s vote on the bill last month, has only one purpose: to allow the banking industry to skirt paying for certain important patents involving “business methods.”

The provision even allows “retroactive reviews of approved business method patents, allowing the financial services industry to challenge patents that have already been found valid both at the U.S. Patent and Trade Office and in Federal Court,” according to Representative Aaron Schock, an Illinois Republican who tried to strike the provision.

The legislation was initially introduced by Senator Charles E. Schumer, a New York Democrat, with an even narrower view: to protect the interests of his big bank constituents in a dispute with DataTreasury Corporation of Plano, Tex., a company that owns dozens of patents for processing digital copies of checks.

Wall Street fought for the bill because it says it has been held hostage by holders of “business method” patents that should never have been granted by the patent office in the first place. Banks like JPMorgan Chase have been fighting DataTreasury over its patents for years.

The language in the bill is expansive. It covers patents for “a financial product or service” as well as “corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.”

But since the bill and Section 18 were passed and word has spread about it, dozens of other companies are starting to worry that the breadth of the provision may affect them too. And they are fighting back, hoping that the Senate — which still has to reconcile the House’s bill with its own — tosses the provision out.

“It would be a tragedy if the greed of the big banks and their willing accomplices in Congress use this important legislation to trample the rights of legitimate patent holders and in the process weaken the integrity of our patent system,” Tom Giovanetti, the president of the Institute for Policy Innovation, a conservative research group, said in a statement.

Steven F. Borsand, executive vice president for intellectual property at Trading Technologies International, which develops high-performance trading software for derivatives professionals, is worried that Section 18 will allow many of his banking clients to simply copy his company’s software.

“This isn’t just about DataTreasury,” he said. “Section 18 will affect many companies, including ours.” He expects that his company will be forced to “spend more time and money defending” its patents, he said in a statement, adding, “Only lawyers stand to benefit from this.”

Other companies, including high-tech firms like VeriFone and Square, the mobile phone payment start-up, could be affected by the law, putting their patents in jeopardy. Cantor Fitzgerald, known for its computer-based bond brokerage, has a number of valuable patents that could similarly fall under the legislation.

Of course, in the grand scheme of things, a new patent law may seem to be unimportant or to affect only a few inventors.

But Section 18 represents a much larger issue: It is perhaps the most blatant demonstration of the lobbying power of Wall Street and, just as important, the willingness of Congress to support the interests of the banks, even in the face of clear evidence that the law has no purpose other than to benefit the financial services industry.

When anyone suggests that Wall Street owns Congress — whether true or not — Section 18 will be Example A of a pork-barrel project for Wall Street. For lack of a better cliché, it might even be considered another backdoor bailout of the banks.

The banks “are attempting to write into law what they have been unable to achieve in litigation,” Representative Maxine Waters, Democrat of California, wrote in a letter to colleagues.

Mr. Schumer has said he is simply defending New York banks against a company that has made a “cottage industry out of extracting legal settlements” from a dubious patent provision.

Admittedly, it seems somewhat preposterous that simply processing scanned checks, as DataTreasury does, could be a patentable business method. But we have courts, which have upheld these patents, for a reason.

Perhaps it would be acceptable if the law was about a specific patent, but experts like F. Scott Kieff, a professor at George Washington University Law School and a senior fellow at the Hoover Institution at Stanford, worry that the law is too broad. “The scope is enormous and almost any method patent can qualify,” he wrote in a Hoover Institution journal.

He is worried about the law’s impact not just on investors in the United States, but also about even broader implications. “When word gets out that intellectual property rights are not being taken seriously in the U.S., especially for any class of patents that can be a convenient political target of powerful, well-heeled interest groups like banks, our voracious international competitors will pounce,” he said.

He may or may not be right about that. But if the legislation does become law, it will be another reason the “powerful, well-heeled” will appear to have bought Congress again.

Article source: http://feeds.nytimes.com/click.phdo?i=8e6ef95c9381cfa003aa8dfd84eef778

Filed Under: Business News Tagged With: , ,

Economix: Simon Johnson: The Big Banks Fight On

June 15, 2011 by Leave a Comment

Today's Economist

Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”

The bank lobbyists have a problem. Last week, they lost a major battle on Capitol Hill, when Congress was not persuaded to suspend implementation of the new cap on debit card fees. Despite the combined efforts of big and small banks, the proposal attracted only 54 votes of the 60 needed in the Senate.

On debit cards, the retail lobby proved a surprisingly effective counterweight to the financial sector. On the next big issue — capital standards — the bankers have a different problem: this highly technical issue is more within the purview of regulators than legislators and is harder to develop a crusade about, as it’s widely regarded as boring.

As the bankers busily rallied their forces to fight on debit cards and spent a great deal of time lobbying on Capitol Hill, they were doused with a bucket of cold water by Daniel K. Tarullo, a governor of the Federal Reserve.

In a speech on June 3, Mr. Tarullo implied capital requirements for systemically important financial institutions — a category specified in the sweeping overhaul of financial regulation last year — could be as high as 14 percent, or roughly double what is required for all banks under the Basel III agreement.

Whether the Federal Reserve will go that far is not certain; a capital requirement of an additional 3 percent of equity (on top of Basel’s 7 percent) may be more likely, but that is still 3 percent more than big banks were hoping for. (These percentages are relative to risk-weighted assets.)

The big banks are likely to mount four main arguments as they press their case against the additional capital requirements, Reuters has reported:

1. “Holding capital hostage” will hurt the struggling economy because it will mean fewer loans at a time when lending is already depressed.

2. Establishing “huge” capital buffers is an admission by regulators that last year’s Dodd-Frank financial overhaul does not accomplish its goal of reducing risk.

3. If banks hold onto more capital and make fewer loans, borrowers will turn to the “shadow banking sector” – the so-called special purpose vehicles, for example — which has little or no oversight.

4. Tough standards in the United States would create a competitive disadvantage vis à vis other countries.

Each of the bankers’ arguments is wrong in interesting and informative ways.

First, capital requirements do not hold anyone or anything hostage — they merely require financial institutions to fund themselves more with equity relative to debt. Capital requirements are a restriction on the liability side of the balance sheet — they have nothing to do with the asset side (in what you invest or to whom you lend).

There is a great deal of confusion about this on Capitol Hill, and whenever bankers (or anyone else) talk about holding capital hostage, they reinforce this confusion. This is not about holding anything; it is about funding relatively less with debt and more with loss-absorbing equity. More equity means the banks can absorb more losses before they turn to the taxpayer for help. This is a good thing.

The idea that higher capital requirements will increase costs for banks or cause their balance sheets to shrink or otherwise contract credit is a hoax — and one that has been thoroughly debunked by Anat Admati and her colleagues (as this now-standard reference, which everyone in the banking debate has read, shows us).

Professor Admati is taken very seriously in top policy circles. (Let me note, too, that she is a member of the Federal Deposit Insurance Corporation’s Systemic Resolution Advisory Committee, an unpaid group of 18 experts that meets for the first time next week; I am also a member.)

In a recent public letter to the board of JPMorgan Chase, whose chief executive, Jamie Dimon, is an opponent of higher capital requirements, Professor Admati points out that these requirements would — on top of all the social benefits — be in the interests of his shareholders. The bankers cannot win this argument on its intellectual merits.

The second argument, that establishing “huge” capital buffers is an admission by regulators that last year’s Dodd-Frank financial overhaul does not accomplish its goal of reducing risk, is an attempt to rewrite history.

During the Dodd-Frank debates last year, the Treasury Department and leading voices on Capitol Hill — including bank lobbyists — said it would be a bad idea for Congress to legislate capital requirements and should leave them to be set by regulators after the Basel III negotiations were complete.

Now the time has come to do so, and Mr. Tarullo is the relevant official — he is in charge of this issue within the Federal Reserve and is one of the world’s leading experts on capital requirements.

But the banks now want to say that this is not his job as authorized by Dodd-Frank. This argument will impress only lawmakers looking for any excuse to help the big banks.

The third bankers’ argument, that borrowers will turn to the “shadow banking sector,” contains an important point — but not what the bankers want you to focus on.

The “shadow banking sector” — special purpose vehicles, for example — grew rapidly in large part because it was a popular way for very big banks to evade existing capital requirements before 2008, even though those standards were very low.

They created various kinds of off-balance-sheet entities financed with little equity and a great deal of debt, and they convinced rating agencies and regulators that these were safe structures. Many such funds collapsed in the face of losses on their housing-related assets, which turned out to be very risky — and there was not enough equity to absorb losses.

It would be a disaster if this were to happen again. It is also highly unlikely that Mr. Tarullo and his colleagues will allow these shadows to develop without significant capital requirements.

Sebastian Mallaby, who has carefully studied hedge funds and related entities, asserted correctly last week in The Financial Times that it would be straightforward to extend higher capital requirements to cover shadow banking.

The fourth bankers’ argument, that higher equity requirements in the United States would create a competitive disadvantage vis à vis other countries, is like arguing in favor of the status quo in an industry that emits a great deal of pollution, a point made by Andrew Haldane of the Bank of England.

If China, India or any other country wants to produce electricity using a technology that severely damages local health, why would the United States want to do the same? And if the financial pollution floats from others to the United States through cross-border connections, we should take steps to limit those connections.

The Basel III issues may be boring, but they are important. The incorrect, misleading and generally false arguments of bank lobbyists should be rejected by regulators and legislators alike.

Article source: http://feeds.nytimes.com/click.phdo?i=03e5e68304a840fc482250643e11f8e7

Filed Under: Economy News Tagged With: , ,

Economix: Podcast: Dodd-Frank, Housing and Europe’s Power Banker

June 11, 2011 by Leave a Comment

It’s been a year since Congress enacted the Dodd-Frank financial regulation law. That might seem plenty of time to get the new rules in good working order. But as it turns out, many haven’t even been written yet, and lobbying is under way to derail at least some of them.

Louise Story, who covers finance for The Times, has been writing about the obstacles to completing and implementing the regulations required by the law, and she discusses them on the new Weekend Business podcast. Some lobbyists are trying not only to slow the process, she says, but also to overturn the law, if not during this Congress then after the 2012 election.

In another conversation in the podcast, Robert Shiller, the Yale economist, says a social epidemic of rampant optimism caused the housing bubble. As he writes in the Economic View column in Sunday Business, the expectations of home buyers have since plummeted, making it likely that the housing market will remain weak for months to come.

And David Gillen talks to Liz Alderman about the central role of Josef Ackerman, the head of Deutsche Bank, in dealing with the European debt crisis. As she writes on the cover of Sunday Business, Mr. Ackerman may be the most powerful banker in Europe.

While he dispenses advice to European politicians, he is a servant of the shareholders of his own bank. Deutsche Bank’s interests and those of the citizens of an embattled country like Greece are hardly identical, as has been made very clear as the financial crisis continues.

You can find specific segments of the podcast at these junctures: financial regulation (31:07); news roundup (22:05); Deutsche Bank (18:22); Robert Shiller (10:38); the week ahead (2:08).

As articles discussed in the podcast are published during the weekend, links will be added to this posting.

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

Article source: http://feeds.nytimes.com/click.phdo?i=f257de830ce9ae1f534c8f069c8f1d30

Filed Under: Economy News Tagged With: , ,