Both Democratic and Republican lawmakers from the Senate Banking Committee opposed the initiative, arguing that the Fed should only be in charge of monetary policy. Democratic Senator for the State of Connecticut, Christopher Dodd John resists the Fed has the power to control financial institutions, said the New York Times: a The Mr. Nobel Laureate in Economics is full of insight into the issues. Dodd said the Fed giving a new role overall risk as a regulator, could also compromise their independent status and generate a conflict with its mandate to control inflation . The proposed reform does not end there and contemplates the creation of a body which would oversee the financial risk across the board and another that would focus on security financial products for consumers. At first you may think they are two measures will be interesting though to see in practice the power given to them so that they become elements of risk containers. In this sense, if for example, these agencies only warn about risks that may occur in the economic booms are not too taken into account.
This is what happened at the same Alan Greenspan who admitted that he had been warned about the risks of subprime but that underestimated. It will be necessary to ensure that these agencies have an adequate level of flexibility to adapt to changing financial instruments that will emerge with greater levels of complexity in engineering. If the level of sophistication achieved by the new instruments will miss understanding on this would risk more diffuse the value of such bodies. Two other measures aimed directly at financial institutions and limit the expansion of the financial system. By demanding a higher level of additional capital to higher risk and require operators to maintain a certain percentage of mortgages that generated by limiting multiplication of the turnover of these entities. In this sense, the regulation must strike a balance not to be extreme to the point of unduly limiting the generation of funding. This reform also brings bad news for the risk rating because it provides measures to avoid generating conflicts of interest. During the crisis, rating agencies who were responsible for assessing the quality of new assets benefited from growth, and that is why if possible, obviously anything that might affect your rating and a your own business.
Moreover, it is good that seek to generate greater transparency in the market even though experience shows that this goal is elusive. Obama's government reform demonstrates that he learned the dangers of the financial system. Greater control over exotic markets and debt markets, is what it also comes with the reform. Balance, regulation and free markets, and higher coverage of the financial system are the objectives of the reform proposal. Also a target of not less than the reform is inserted into the structure of regulation and international supervision. The proposal sounds interesting, but first to be confident, better seen in operation. Latinforme.com is the main source of financial information and independent opinion on American and global markets from a Latin American perspective. From our offices in Buenos Aires, Argentina, I approached the latest news and alerts to help you make gains regardless of the direction taken by the market.