What we most need right now is a national conversation about the economy and America’s future. 

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Last year was not an easy year to be a banker.  This one will not be a great deal better.  But if banks take the right steps now, opportunities will emerge in the long run.  There are indeed glimmers of light at the end of this dismal tunnel. 

While much of the industry’s attention is centered on congressional efforts to revamp financial services, a proposal from the Basel Committee on Banking Supervision also could significantly rewrite the rules of banking.

The House of Representatives passed a sweeping financial reform bill Dec. 11, and soon the Senate will begin action on its version.  The House bill passed by a  partisan split; time will tell whether the Senate bill breaches the political divide.

Tommaso Padoa-Schioppa, former chairman of the Basel Committee on Banking Supervision, expects capital requirements proposed by the group to be eased to ensure banks can comply, and said governments may only adhere in part. 

The financial crisis of 2007 to 2009 has taught the financial world, including regulators, many powerful lessons.   

We are living with a painful disconnect between Wall Street on the one hand and Main Street and Washington on the other.  

Many will say that we are through the grimmest part of the worst financial crisis since the Great Depression, and in many ways they are right. 

A key rule-setting committee of the Bank for International Settlements said Thursday that beefed up rules on the amount of capital banks need to set aside against potential losses will be phased in as financial conditions improve, but with a target of the end of 2012. 

David Nason, one of the architects of the Troubled Asset Relief Program and now an executive at Promontory Financial Group, contends that the financial bailout’s repayment standards need to be re-examined.

Interview with Tommaso Padoa-Schioppa  

As the House begins its Floor debate this week on financial regulatory reform, it is clear that the time is ripe for action. 

Requiring systemically important institutions to draw up living wills could reduce the pressure on government authorities to provide assistance when those institutions fail. While the idea has broad support, its implementation raises several questions: how should the ‘systemically important’ group be defined? How would living wills function when national laws are not harmonized? Who will supervise them?

Critics of regulatory reform legislation claim provisions designed to let the government unwind systemically important institutions are riddled with exceptions that would allow bureaucrats to perpetuate too-big-to-fail policies.

We are living with a painful disconnect between Wall Street on the one hand and Main Street and Washington on the other.  Unfortunately, this disconnect has tarnished the reputation of banking generally and made it harder for the industry to collaborate with the government. 

Eugene Ludwig discusses Senator Dodd's banking reform proposal.

The U.K.'s myriad overseas territories and crown dependencies must improve standards on financial regulation and tax information-sharing and should broaden their tax base or face possible consequences, a U.K. treasury commissioned report said Thursday.

Wise CEOs and senior managers are turning their attention to the future operations and opportunities of their companies. 

The federal financial rescue has ignored institutions that drive much of the economy. 

"One thing that's unsatisfying about finance is, finance is about balance," says Eugene Ludwig, former head of US-bank regulation under President Bill Clinton.

http://tvnz.co.nz/business-news/finance-rebalancing-tricky-act-3066455

Eugene A. Ludwig is interviewed by Alan Kohler - Inside Business - ABC News

http://www.abc.net.au/insidebusiness/content/2009/s2710690.htm

Gene Ludwig, founder and CEO of Promontory Financial Group, served as Bill Clinton's head of banking regulation in the 1990s.  He speaks with Business Spectator's Isabelle Oderberg about the global economy. 

Ultra-low interest rates put in place during the global financial crisis have the potential to fuel excessive economic activity and eventual bust, particularly in Asia, according to a former top US bank regulator.

A storm is brewing for financial institution CEOs and board compensation committees.

A storm is brewing for financial institution CEOs and board compensation committees.

Banks operating in western states are more than twice as likely to be issued a regulatory enforcement action compared with banks based in other parts of the country.  This accelerating trend is placing heavy demands on bank directors.

Senate Banking Committee Chairman Chris Dodd pressed his case Tuesday for creating a single regulator to oversee U.S. banks.

Nearly a year after it was enacted, the consensus is that the Troubled Asset Relief Program saved the economy from ruin -- but it did so at a heavy cost for bankers.

The financial crisis of 2007-2009 has produced a playing field increasingly tilted against community banks and a general danger for all banks that regulatory burdens will increase markedly as compared with un and underregulated financial firms.

The cameras and lights were all trained on president Obama as he delivered a stern message in downtown Manhattan about the need for reform in the finance industry.

As regulators struggle to draft tougher rules, some worry that the rebound is robbing the reform movement of urgency.  And that could have serious repercussions for the economy.   

As the world’s financial markets begin to stabilize, government leaders are under significant pressure to make our financial institutions immune from a recurrence of the losses they experienced.

Would panic prevail? That was the question gripping the world in the days surrounding the fall of Lehman Brothers on Sept. 15, 2008. One year after that terrifying Monday, the people who struggled to cope with the financial crisis share what they were thinking as chaos broke out.  David Nason, Managing Director, Promontory Financial Group is featured on page 26.

We are about to see the advent of a new regulatory environment.  In the first part of this presentation, I will talk about this new environment under the current state of play. Then I will discuss what the Obama administration’s white paper on financial regulatory reform, if put into law, would mean for risk management.

Make no mistake about it, a new era of consumer financial regulation is upon us.  Whether the Federal Reserve Board or a new consumer agency writes the rule book, tougher consumer rules and enforcement will come to be. 

For bankers, for the economy and for ordinary working men and women, the next several months will be critical. Congress, the bank regulatory agencies and the administration will be debating and possibly enacting into law measures that will reshape our financial regulatory mechanisms. A new regulatory regime has the potential to change the structure of banking, the availability of credit and the underpinnings of the economy itself.

Since it is chillingly clear that U.S. financial institutions have for a good while been regulated no more stringently than, say, demolition derby drivers, Washington has belatedly locked the garage door and begun to debate strict new rules.  The blueprint at hand is President Obama's sweeping proposal in min-June to revamp the responsibilities of government agencies and impose new regulations on the financial establishment. Nothing about this plan will fall easily into place: Too may government agencies will dig in their heels.  Too many financial companies will battle every aspect of reform that threatens their bottom lines.

The Obama administration’s financial reform plan is being questioned on a fundamental basis: Will it resolve the problem of financial companies becoming “too big to fail”?

Tucked into the Treasury Department's proposed regulatory overhaul is a push for banks to salt away more money for losses when times are good.

The drive to create a new consumer protection agency — a key component of the Obama administration’s regulatory restructuring plan — will get its first test in a House hearing this week and has already sparked fierce debate.

It is a fundamental article of faith in our developed world that a vigorous, freemarket- driven economy is essential to a country’s long-term international competitiveness and its capacity to generate economic well-being. I would go further and say a vigorous private sector, including the financial sector, is essential for global well-being.

Interview with Tommaso Padoa-Schioppa 

Wall Street's great investment houses have never faced a serious foreign challenge in their own backyard.  But as tectonic shifts reverberate through the banking industry, their overseas rivals are edging into some of the most lucrative corners of American finance.

As any schoolyard veteran can attest, there are worse names to be called than “tertiary,” stronger epithets to hurl than “asinine,” and more effective ways of goading someone than to question the depth of his commercial banking experience.

For years, the regulatory regime that governs Wall Street has been paralyzed by two conflicting impulses. 

Regional banks will soon get their own stress test results in the familiar form of the shared national credit exams, but the report card could be uglier than ever.

 Marketplace Public Radio Interview with Mike Patriarca

Enacting credit card reform and completing the stress tests cleared a path for regulatory restructuring, but policymakers still face long odds of accomplishing any changes this year.

As the financial system begins to recover, it becomes clearer that two issues that need to be addressed by policymakers are the improvements to the regulatory mechanism and the shape of the financial system itself. The two issues are linked, and both are formidable.

The stress test results are raising doubts that the government’s next financial stability project — a plan to let banks get rid of toxic assets — is still needed.

In a bid to shore up confidence in the U.K. banking system, the Financial Services Authority disclosed details of how it expects banks to rest that they hold enough capital.

People have accused the baby boomers of being whiners almost since we were born.  But just wait until we get to retirement age and discover that we don't have nearly enough money to take care of our "golden years."   That's going to be the ultimate generational bummer.

Three architects of the Troubled Asset Relief Program defended their efforts to fend off a collapse of the financial system last year.

Just months ago bankers largely trusted the government’s word, knew what it took to be considered well capitalized and felt confident that any fiats affecting them were dictated by well-known regulators without interference from the Treasury Department or Congress.

Danish toy company Lego recently explained how it used stress tests to understand how its business would respond to changes in the global economy, including doomsday scenarios.  It is an interesting comment on our times that a toymaker has adopted techniques long thought to be the preserve of financial institutions.

Though we are not out of the woods yet, the time is ripe for bankers and policymakers to consider how to achieve the right private-public sector balance in the new financial services world that is taking shape.

The Obama administration is considering making public some results of the stress tests being conducted on the country's 19 largest banks, said people familiar with the matter, a move that could help more clearly separate healthy banks from the weaklings.

While policymakers are focused on giving regulators more power to oversee financial institutions, a growing list of government watchdog reports suggest the banking agencies have failed to effectively use the powers they already have.

Whither Basel II?  With implementation barely begun in the United States, the international capital rule is already considered out of date. 

The Excel centre, a windswept complex deep in London's Docklands, is best known as the venue for an annual boat show.  On Thursday it is instead the destination for a flotilla of limousines as US president Barack Obama and other leaders assemble in an effort to rescue a shipwrecked world economy. 

In ordinary times most people would not get their blood up over an issue like bank loan-loss reserves. Even for financial executives, “allowance for loan and lease losses,” the technical name for bank reserves, is a yawner.

Banks have already been threatened by Adair Turner with a "revolution" in how they are regulated.  But yesterday's wide-ranging report by the chairman of the Financial Services Authority produced something akin to relief at what was seen as closer to a stay of  execution than another rattle of the tumbrils.

News early Monday that Washington’s preferred stake in Citigroup Inc. might convert to common stock — expanding regulators’ reach deeper into the company — raises a disturbing question: Does the government know what it’s doing?

A growing reliance on tangible common equity as a gauge of banks’ financial condition is a sign that investors have lost faith in regulators’ ability to predict and solve problems at financial institutions.

The rigorous review the Obama administration plans to conduct across the nation’s largest banks as part of its revamped bailout could reveal a troubled network of financial institutions that have been slow to acknowledge bad loans and are struggling to build reserves.

The new pay cap for some of America’s top bankers is rooted in the short-term exigencies of a government bailout, but it also may signal a turning point that affects executive pay for years to come.

Think of the financial crisis as a horror movie called “Toxic Waste.” It has the same basic plotline as the “Alien” movies. There are deadly creatures hiding in the interstices of the financial  ystem. At first, it looks as if these gremlins are just in “subprime” loans, but it turns out they’re everywhere. They started by eating Lehman Bros. Now they’re eating Citigroup. . . . They’re eating Bank of America. . . . Eeeek!

At least 30 banks since 2000 have escaped federal regulatory action by walking away from their federal regulators and moving under state supervision, taking advantage of a long-standing system that allows banks to choose between federal and state oversight, according to a Washington Post review of government records.

Stocks took another header yesterday, nearly 3% on the Dow this time, continuing their decline in the New Year since Congress has returned and as the federal government once again revs up its bailout machinery. Maybe this isn’t a coincidence.

A tightening of U.K. regulations as a result of the credit crunch is set to make the job of board members at banks operating in London's financial center increasingly onerous.

Eugene Ludwig is a former Comptroller of the Currency and former board member of the Federal Deposit Insurance Corp., where he oversaw the Resolution Trust Corp. during the savings and loan crisis two decades ago.  He's now CEO of Promontory Financial Group, which offers products and services to banks and other financial firms.

Rather than continuing to debate who is worthy of federal money and who isn’t, maybe Congress should just follow John Maynard Keynes’s suggestion about burying money underground and letting people dig it up. That’s as efficient a stimulus package as anything else I’ve heard lately.

Borrowers need credit and banks and other lenders need to make loans.  How did things go wrong from there?

Each rogue trading loss drives an increased emphasis on the sharpening of controls. So why do they keep occurring? Do banks learn anything from the actions of the Kerviels and Leesons of this world, or is it more a case of these events offering a textbook on how future rogue traders can avoid detection?

 Regulation of financial services in the United States will not change dramatically in the near future unless the markets and industry deteriorate further, former banking and securities regulators said on Wednesday.  "If problems get worse, odds favor significant changes," Eugene Ludwig, former Comptroller of the Currency, said at a U.S. Chamber of Commerce event examining financial regulation. Ludwig is now chief executive at Promontory Financial.

Wayne Rushton, the OCC's former chief national bank examiner, agreed that banks with an overconcentration in one lending area are especially worrisome right now. "When you as a bank decide to concentrate your business on that particular niche market, you're most likely taking on significant risk in the event of a downturn," said Mr. Rushton, now a senior adviser to the chairman and chief executive officer at Promontory Financial Group. "That's the cause of all the anxiety right now." "There's a saying among bank examiners: Banks that make commercial real estate loans should be prepared to own and operate the property when conditions deteriorate."

Thursday, March 20, 2008 by Eugene A. Ludwig. We are still only partly through the current financial storm — perhaps fairly characterized as a financial hurricane. The housing price adjustment continues, and until house prices stop dropping, we will not turn the corner to recovery.