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-------- Original Message --------
| Subject:
|
UNCTAD: Policy alternatives to respond to the
global crisis with "global answers." |
| Date:
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Fri, 15 May 2009 00:38:39 -0700 |
| From:
|
"Stephen M. Apatow" <s.m.apatow@humanitarian.net> |
| To:
|
Pascal.Lamy@wto.org, hri@int-bar.org |
Dear Colleagues:
We thank the leaders in the United States for moving ahead emergency action
to contain the systemic disruption attributed by the unregulated OTC derivatives,
we hope that similar actions will advance to limit damage associated with
speculative trading in the commodities futures markets.
On Wednesday, Treasury Secretary Timothy Geithner proposed new regulations
on derivatives trading. The administration's goal is to introduce greater
transparency to these financial contracts in order to reduce the systemic
risk they pose to financial markets and to the economy as a whole. --
Derivatives Trades Should All Be Transparent: Wall Street
Journal, 15 may 2009.
President Obama’s new proposal to regulate derivatives would go a long
way toward reining in the complex products and reckless practices that have
been a big factor in the financial crisis. -- New Rules for Derivatives: New York Times, 14 May 2009.
As noted in the memo "Deflation Consensus: International Mandate," until
we have a functional global regulatory framework, each country must fast track
emergency regulatory actions, to prevent further systemic deterioration of
the global financial markets.
Please note the following resource sent to me from Dr. Lichia Saner-Yiu,
President,Centre for Socio-Eco-Nomic Development (CSEND).
----------
From: "Prof. Lichia Saner-Yiu" <yiu@csend.org>
Date: Thu, 14 May 2009 11:16:30 +0200
To: 'Humanitarian Resource Institute' <news@humanitarian.net>, s.m.apatow@humanitarian.net
Subject: RE: [Fwd: Deflation Consensus: International Mandate]
Dear
Stephen,
Thanks
for your thoughtful work! I have appreciated your contributions to
our community.
In light
of your advocacy effort, I want to point you to a very important discussion
based on the UNCTAD report, just in case that you missed it. The
video presentation is excellent for non-economists.
Dr. Lichia
Saner-Yiu, President
Centre for Socio-Eco-Nomic Development (CSEND)
CP
1498 Mont Blanc
UNCTAD: A global crisis needs global answers : Heiner Flassbeck, Director
of UNCTAD's Division on Globalization and Development Strategies, explains
the factors at the origin of the current economic crisis and outlines policy
alternatives to respond to the global crisis with "global answers."
Beginning with the subprime
credit collapse and the unwinding of speculative positions in the stock,
financial and commodities markets, Flassbeck traces the origins of the crisis
through unsustainable price increases and the inevitable crash.
-------- Original Message --------
Dear Colleagues:
The derivatives fabrications that fueled hyperinflation and collapse
of the global financial system, must be corrected and hyperinflated valuations
adjusted to pre-derivatives distorted valuations. This is considered
the only path to global economic recovery, not flooding the system with
central bank money to support the derivatives market, providing a temporary
trading delusion destined to crash, spiraling damage to the the global financial
system to another level.
An 8.1 million U.S. foreclosures projection during the next 4 years
encompasses a crash, not recovery. Disgust is the only descriptive word
that is appropriate for the international outrage associated with the lack
of concentrated efforts to contain the unregulated OTC derivatives:
Moreover,
the regulators' recent "stress tests" on bank holding companies didn't fully
measure the cash squeeze those institutions could face if souring conditions
forced them to post tens of billions of dollars in additional collateral
on some of their insurance-like bets, known as derivatives. The banks' financial
reports to regulators for the quarter ending March 31 also tell a potentially
ominous story about their holdings of derivatives, instruments whose value
is tied to an underlying asset, such as a pool of subprime mortgages.
Seventeen of the 19 largest banks reported that, in the event of an economic
catastrophe, they face combined derivatives losses exceeding $568 billion.
-- Big banks could lose more than stress tests projected:
Miami Herald, 12 may 2009.
One of the reasons
for the international financial crisis was the rise of the value of financial
derivatives and margin trading in the world from $31.36 trillion (Dh1,217trn)
in 2005 to $56.23trn in 2008, said Dr Ali Lutfi, former Prime Minister of
Egypt, who has taught economies at a number of universities in this country....
Other reasons for the crisis included the non-planned credit expansion,
expansion in bad property loans, increase of luxury consumption, weak control
on financial institutions, deterioration of the US economy over the last
year, growth of trade in finance assets and securitisation of some of them,
emergence of new financial tools in stock exchanges, corruption of rating
agencies, auditing offices in some giant companies… he said during
a lecture he delivered at The Special Economic Zones Forum in Sharjah. --
'Rise
in derivatives value triggered global crisis': Emirates Business, 12
may 2009.
Criminal investigation of global market collapse, the focus of the
"Fraud
Enforcement and Recovery Act (FERA) Picks Up Speed; Madoff ...: (Accountingweb.com)
a model for UN member countries:
Last week, the U.S. House of Representatives passed its own version (containing
certain amendments from the Senate version) of S. 386, the Fraud Enforcement
and Recovery Act of 2009 (FERA). The Senate voted 92-4 in favor of the bill
on April 28, and the House voted 367-59 in favor of its version of the bill
on May 6....
Financial Crisis Inquiry Commission May Explore Accounting, Much More
Mark-to-market
accounting is one of over 20 issues that would be potentially be explored
by a Financial Crisis Inquiry Commission (as named in the House version
of the FERA bill; with a slightly different name in the Senate version).
Cady North,
FEI's Manager of Government Relations, explains: "The bill includes $5 million
for the creation of a Select Committee to investigate the economic crisis.
The panel would have 10 members, six chosen by congressional Democrats and
four by Republicans. The chairman and vice chairman would be from different
parties. No elected officials could serve on the panel, which would have
subpoena power."
According
to the House version of the bill, excerpted below, the Financial Crisis
Inquiry Commission (FCIC) would be charged with: "examin[ing] the causes
of the current financial and economic crisis in the United States, specifically
the role of--
(A) fraud and abuse in the financial sector, including fraud and abuse
towards consumers in the mortgage sector;
(B) Federal and State financial regulators, including the extent to which
they enforced, or failed to enforce statutory, regulatory, or supervisory
requirements;
(C) the global imbalance of savings, international capital flows, and
fiscal imbalances of various governments;
(D) monetary policy and the availability and terms of credit;
(E) accounting practices, including, mark-to-market and fair value rules,
and treatment of off-balance sheet vehicles;
(F) tax treatment of financial products and investments;
(G) capital requirements and regulations on leverage and liquidity, including
the capital structures of regulated and non-regulated financial entities;
(H) credit rating agencies in the financial system, including, reliance
on credit ratings by financial institutions and Federal financial regulators,
the use of credit ratings in financial regulation, and the use of credit
ratings in the securitization markets;
(I) lending practices and securitization, including the originate-to-distribute
model for extending credit and transferring risk;
(J) affiliations between insured depository institutions and securities,
insurance, and other types of nonbanking companies;
(K) the concept that certain institutions are `too-big-to-fail' and its
impact on market expectations;
(L) corporate governance, including the impact of company conversions
from partnerships to corporations;
(M) compensation structures;
(N) changes in compensation for employees of financial companies, as
compared to compensation for others with similar skill sets in the labor
market;
(O) the legal and regulatory structure of the United States housing market;
(P) derivatives and unregulated financial products and practices, including
credit default swaps;
(Q) short-selling;
(R) financial institution reliance on numerical models, including risk
models and credit ratings;
(S) the legal and regulatory structure governing financial institutions,
including the extent to which the structure creates the opportunity for
financial institutions to engage in regulatory arbitrage;
(T) the legal and regulatory structure governing investor and mortrgagor
protection;
(U) financial institutions and government-sponsored enterprises; and
(V) the quality of due diligence undertaken by financial institutions;
Additionally,
the bill specifies the FCIC would be required to:
- examine the causes of the collapse of each major financial institution
that failed
- submit a report,
- refer potential violations of the law to the U.S. Attorney General
and State attorney generals, and
- build upon (but not duplicate)the work of other entities (such as congressional
committees, GAO, other agencies) to avoid duplication in conducting its examination
of these matters.
Looking forward to your feedback and guidance for UN member countries...
Stephen M. Apatow
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