Wall St leaders say new, not more, regulation needed
Even as markets plunge amid a crisis of confidence, Wall Street officials argued on Tuesday that the world’s financial institutions need a new and different kind of regulation, rather than more of it.
As the securities industry’s reputation sank to new lows, nearly a thousand Wall Streeters braved rain and plunging bank stocks to attend the Securities Industry and Financial Markets Association’s annual meeting. Officials ranging from New York Mayor Michael Bloomberg and former SEC Chairman Harvey Pitt called for streamlined regulation and a system that can better handle the market’s dramatic changes of the past decade.
“Our regulatory system is sometimes called a patchwork. It seems there are more holes than patches,” said Blythe Masters, global head of commodities at JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) and SIFMA’s new chairwoman.
Among other proposals, Masters said SIFMA would encourage the consolidation of two federal bank regulators –Office of Thrift Supervision and Office of the Comptroller of the Currency — as well as a merger of the Securities and Exchange Commission and the Commodities Futures Trading Commission.
Masters also took issue with supervision from 50 states and warned against individual states weighing in on a part of the market she knows well, credit default swaps.
“We have to avoid redundancy and burdensome regulation,” she said. “State regulation is not appropriate and it will add to complexity and risk.”
The recent settlement of Lehman Brothers CDS transactions showed that these structured securities do not need new layers of regulation one hour cash loan.
Masters observed that insurer American International Group (AIG.N: Quote, Profile, Research, Stock Buzz) collapsed despite the oversight of dozens of state and federal bodies.
SIFMA does seek, however, the establishment of a new, federal-level regulator for insurance companies.
That said, Masters acknowledged that Wall Street has a ways to go to restore the public’s trust. “It’s safe to say our industry’s image is at an all-time low.”
BAD REPUTATION
Harvey Pitt, who served a brief and stormy term as SEC chairman, said the U.S. market regulatory system “is terribly broken.” He blamed a lack of transparency and information.
“One thing is clear within firms and externally: no one knew just how leveraged these firms were,” Pitt said, observing that CEOs announced write-downs within weeks of denying they had an exposure problem.
Though there is plenty of debate over how the U.S. financial industry should be regulated, most speakers agreed the current system of multiple state and federal agencies failed to prevent the current crisis.
Mary Schapiro, chief executive of the brokerage industry-owned regulator FINRA, said she favors a “twin peaks” model, comprised of two regulators. One would be financial markets stability regulator, with broad enforcement powers, and the other a business practices watchdog.