Matt Wuerker

The Case Against International Financial Coordination

Global coordination of banking regulation, like global governance, sounds good - especially to bankers. That is because they know that it cannot deliver the tough regulations, closely tailored to domestic economic and political requirements, which financial markets badly need following the worst upheaval the world economy has experienced since the Great Depression.

CAMBRIDGE – When US President Barack Obama announced in late January his intention to seek tough new rules for banks, he wasn’t expecting to make friends on Wall Street. We will henceforth prevent banks from trading on their own account and from growing too large, Obama declared. The internal battle within the Obama administration seemed to have been won by Paul Volcker, the impressive and outspoken former Federal Reserve chairman who has long been a critic of financial innovation.

Unsurprisingly, Goldman Sachs and other Wall Street firms are dubious about the “Volcker rules.” So, too, are the Republicans in Congress, along with some Democrats who feel that the scheme has come too late and may interfere with other reform efforts under way, as watered-down as those initiatives may be. Such domestic opposition weakens the prospect that Obama’s proposals will ever become law.

But the international reaction was less expected. Obama’s announcement received a decidedly unsympathetic reception from Europeans, who perceived his initiative as a unilateral move that would undermine international coordination of financial regulation. The announcement had come without international consultation. It also seemed to violate earlier agreements to cooperate with other nations through the G-20, the Financial Stability Board, and the Basel Committee on Banking Supervision.

To continue reading, please log in or enter your email address.

Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.

required

Log in

http://prosyn.org/nTHyXv9;
  1. An employee works at a chemical fiber weaving company VCG/Getty Images

    China in the Lead?

    For four decades, China has achieved unprecedented economic growth under a centralized, authoritarian political system, far outpacing growth in the Western liberal democracies. So, is Chinese President Xi Jinping right to double down on authoritarianism, and is the “China model” truly a viable rival to Western-style democratic capitalism?

  2. The assembly line at Ford Bill Pugliano/Getty Images

    Whither the Multilateral Trading System?

    The global economy today is dominated by three major players – China, the EU, and the US – with roughly equal trading volumes and limited incentive to fight for the rules-based global trading system. With cooperation unlikely, the world should prepare itself for the erosion of the World Trade Organization.

  3. Donald Trump Saul Loeb/Getty Images

    The Globalization of Our Discontent

    Globalization, which was supposed to benefit developed and developing countries alike, is now reviled almost everywhere, as the political backlash in Europe and the US has shown. The challenge is to minimize the risk that the backlash will intensify, and that starts by understanding – and avoiding – past mistakes.

  4. A general view of the Corn Market in the City of Manchester Christopher Furlong/Getty Images

    A Better British Story

    Despite all of the doom and gloom over the United Kingdom's impending withdrawal from the European Union, key manufacturing indicators are at their highest levels in four years, and the mood for investment may be improving. While parts of the UK are certainly weakening economically, others may finally be overcoming longstanding challenges.

  5. UK supermarket Waring Abbott/Getty Images

    The UK’s Multilateral Trade Future

    With Brexit looming, the UK has no choice but to redesign its future trading relationships. As a major producer of sophisticated components, its long-term trade strategy should focus on gaining deep and unfettered access to integrated cross-border supply chains – and that means adopting a multilateral approach.

  6. The Year Ahead 2018

    The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.

    Order now