Thursday, August 10, 2017

All of Elizabeth Warren's Questions, Summarized

Elizabeth Warren thinks she's taking on big banks but has chosen to focus on non-core issues--employment incentives and surface conflicts of interest--rather than systemic issues like shadow banking and derivatives. Part of this phenomenon is because shadow banking is difficult to understand from a regulatory standpoint, but also because her political donors, including unions, own stock in Wells Fargo and other publicly-traded banks. (Government pension plans assuming 7% interest rates need Wall Street more than they'd like to admit.) 

Without further ado, below is a summary of Elizabeth Warren's questions from all of her finance-related hearings and cross-examinations: 

1. "Why haven't you read everything on this issue?" 

2. "Why aren't you taking positions on third party reports you haven't read?" 

3. "Why aren't you making generalizations about complex issues?" 

4. "Why aren't you making generalizations about proposed rules that aren't yet public?" 

5. "Why aren't you making general statements about all banks and instead taking a more measured case-by-case approach?"

You're welcome. 

Bonus: Here's what I would have asked Mr. Randal Quarles: 

Mr. Quarles, you have vast experience in the financial industry. As we both know, derivatives and shadow banking continue to be serious problems. I've noticed legislators do not focus on these two issues and instead choose to raise relevant but non-systemic risks. Please tell us what you believe are the top two systemic risks in the U.S. financial system today, and what can we do to minimize those risks. If shadow banking and derivatives are not part of your top two systemic risks, please address those risks as well. 

I've wondered why so many legislators do not focus on systemic risks. Part of it must be that such risks involve trillions of dollars and are so large--one might say, "too big to fail"--regulation is difficult. If true, such reasoning would seem to mandate greater focus on systemic risks, not less. Also, is regulation difficult because so many of these risky transactions take place abroad and require multi-party legislation? For example, if LIBOR and reinsurance are involved, wouldn't some cooperation be required between D.C., the U.K., and the EU to accomplish any effective regulation? If so, should legislators work more closely with international counterparts directly rather than rely on international bodies such as the Basel Committee and the IMF? 

No comments: