Thursday, August 30, 2007

NYT: World wants a say in US financial regulation

Yesterday, the New York Times had an article on the subprime mess quoting a number of foreign talking heads demanding more international input into US financial regulation. (See Calls Grow for Foreigners to Have a Say on U.S. Market Rules.)

Yeah, what's new? Actually, that should be the title of the article. What I found most amusing, of course, is the arguments put forward about why there needs to be more of an "international" approach -- whatever that means.

“We need an international approach, and the United States needs to be part of it,” said Peter Bofinger, a member of the German government’s economics advisory board and a professor at the University of W├╝rzburg.

While regulators in the United States have not been receptive to the idea in the past, analysts said that Europe and Asia had more leverage now. Washington might have to yield if it wants to succeed in imposing bilateral regulations on government-owned investment funds from emerging economies.

“America depends on the rest of the world to finance its debt,” Mr. Bofinger said. “If our institutions stopped buying their financial products, it would hurt.”

I believe logicians call that the "we're your customers, therefore we should have a say into how you run things" argument. I suggest you try it with your cell phone carrier some time -- it really does work.

(As for the "we're going to stop buying your products" thought, Mr. Bofinger, you'll stop buying when we stop being so damn profitable, and not a day before--or a day later, for that matter. Do I have to explain everything to you European government types?)

Granted, I expect that kind of thinking from European academicians. (Do you ever stop and wonder what happened between Rene Descartes and today? I mean, seriously. The Europeans actually invented deductive reasoning, and today we get this?) However, the Aussies are in on it, too.

As geographical boundaries are broken down, “a problem in one location is a problem everywhere,” said Dick Bryan, a professor of economics at the University of Sydney.

“There is the need to challenge the sovereignty of national regulators,” he said. “Why should the rules of lending in the U.S. be left to U.S. regulators when the consequences go everywhere?”
There's your problem, Professor Bryan. You are following the lending rules of the United States because you are actually lending in the United States. If you were lending in Australia, the rules might be different. If you don't like it, stop lending to damn ferriners. (Oh, I guess I don't mean you, personally. I mean Australian financial institutions, who, as we all know, are demanding significantly more regulation in the United States...)

Please, everyone. The old saying is don't confuse brains with a bull market. On the flip side, don't confuse conspiracy with a bear market.

You investors and borrowers out there want to know who's to blame for the subprime mess? Look in the mirror.

1 comment:

Ryan said...

In politics, the phrase "it has the advantage of being true" is misleading. That you are correct about the problem with the subprime market doesn't make you more likely to be listened to, but less.