Tatom Financial Market Regulation

Legislation and Implications
1. Auflage 2011
ISBN: 978-1-4419-6637-7
Verlag: Springer
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 240 Seiten

What role should regulation play in financial markets? What have been the ramifications of financial regulation? To answer these and other questions regarding the efficacy of legislation on financial markets, this book examines the impact of the Gramm Leach Bliley Act (GLBA), also called the Financial Modernization Act of 1999, which fundamentally changed the financial landscape in the United States. The GLBA allows the formation of financial holding companies that can offer an integrated set of commercial banking, securities and insurance products. The tenth anniversary of the most sweeping financial legislation reform in the industry's structure is a natural benchmark for assessing the effects of the law and for questioning whether changes are necessary in the working of this historic legislation. The importance of this review is reinforced by a variety of proposals in the last several years to reform the regulation of financial institutions that have attracted considerable attention among regulators and in the financial firms that they regulate. Most recently, the financial crisis and the failure of some large financial institutions have called into question the legitimacy of America's current financial structure and its regulation, including to some degree the GLBA. There is no doubt that regulatory reform is front and center on today's policy agenda. The lessons of the GLBA experience and its effects, both domestic and international, on financial markets and competitiveness, risk-taking and risk management by financial services firms and their regulators will be critical to the direction the country takes and the effort to ensure that future financial crises do not occur or have less costly damage. With contributions from academics, policy experts, and a sponsor of the GLBA, Congressman James Leach, this book is invaluable to anyone interested in financial system reform.

Autoren/Hrsg.

Tatom, John A.

Inhaltsverzeichnis

1;Preface;4
2;Contents ;14
3;Contributors;16
4;Part I Overview: Recent and Prospective Financial Legislation;18
4.1;1 Financial Legislation: The Promise and Record of the Financial Modernization Act of 1999;19
4.1.1; Why Regulate Banks and Other Financial Institutions;20
4.1.2; Looking Back at the GLBAGreat Expectations and Some Skepticism;21
4.1.3; Did the GLBA Achieve Its Intentions;23
4.1.4; The GLBA and the Financial Crisis;24
4.1.5; The Profitability Perspective;28
4.1.6; What About Wallet Share;29
4.1.7; Examining the Legacy;30
4.1.8;References;32
4.2;2 Did the Repeal of Glass-Steagall Have Any Role in the Financial Crisis Not Guilty. Not Even Close;34
4.2.1; Introduction;34
4.2.2; Glass-Steagall in the Context of Banking Law;36
4.2.3; Regulation of the Securities Activities of National Banks;38
4.2.4; Bank Affiliations with Securities Firms;40
4.2.5; What Caused the Financial Instability and Possible Insolvency of the Largest Banks;41
4.2.6; Did the Securities Firms (Investment Banks) Get into Trouble Because of Their Affiliations with Banks;43
4.2.7; Conclusion;44
4.3;3 Glass-Steagall in Our Future: How Straight, How Narrow;45
4.3.1;References;54
5;Part II Some Empirical Evidence on the Effects of the Gramm-Leach-Bliley Act;56
5.1;4 Cross-Border Impact of Financial Services Modernization Act (FSMA): Evidence from Large Foreign Banks;57
5.1.1; Introduction;57
5.1.2; Literature;58
5.1.3; GLBA and Foreign Banks;59
5.1.4; Hypotheses;60
5.1.5; Data and Methodology;64
5.1.5.1; Data;64
5.1.5.2; Portfolio Analysis;66
5.1.5.3; Cross-Sectional Analysis;68
5.1.6; Empirical Results;68
5.1.7; Conclusion;72
5.1.8;References;72
5.2;5 Global Impact of the Gramm-Leach-Bliley Act: Evidence from Insurance Industries of Developed Countries;74
5.2.1; Introduction;74
5.2.2; Literature Review;77
5.2.3; GLBA and the Insurance Industry;78
5.2.4; Hypotheses;79
5.2.5; Data and Methodology;80
5.2.5.1; Data and Events;80
5.2.5.2; Portfolio Analysis;81
5.2.5.3; Cross-Sectional Analysis;83
5.2.6; Empirical Results;83
5.2.6.1; Portfolio Analysis;83
5.2.6.2; Cross-Section Analysis;85
5.2.7; Conclusion;86
5.2.8;References;87
6;Part III Continuing Issues in Financial Regulation;89
6.1;6 A Program for Minimizing the Private and Public Costs of Bank Failures;90
6.1.1; Four Pillar Program to Minimize Costs of Bank Failures;90
6.1.2; Pillar I: Prompt Legal Closure;92
6.1.3; Pillar II: Prompt Estimate and Allocation of Credit Losses;93
6.1.4; Pillar III: Prompt Reopening of Legally Closed Institutions;96
6.1.5; Pillar IV: Prompt Reprivatization and Recapitalization;98
6.1.6; Summary and Conclusions;98
6.1.7;References;100
6.2;7 The Importance of Monitoring and Mitigating the Safety-Net Consequences of Regulation-Induced Innovation;102
6.2.1; Original Purposes and Declining Effectiveness of Exclusionary Laws;104
6.2.1.1; How Regulatory Competition Supports Regulation-Induced Innovation;105
6.2.2; Strategies to Reduce Safety-Net Subsidies to TDFU Institutions;107
6.2.2.1; Improving Incentives in the Private Sector;107
6.2.2.2; Types of Securities Issued;108
6.2.2.3; Improving Incentives in Government;109
6.2.3; Summary Implications;111
6.2.4; Appendix: Tables on Financial Sector Lobbying Compiled by consumerwatchdog.org;112
6.2.5;References;114
6.3;8 Redefining and Containing Systemic Risk;116
6.3.1; When Do Risks Become Systemic;118
6.3.2; Adverse Consequences of Misdiagnosing the Policy Problem;119
6.3.3; Alternative Definitions of Systemic Risk Lead to Different Strategies of Regulatory Reform;120
6.3.4; Why Incentive Defects Persist;121
6.3.5; Steps that Government and Industry Could Take Toward Genuine Reform;122
6.3.5.1; Joint Private Sector and Governmental Reforms;123
6.3.5.1.1; Monitoring Systemic Risk;123
6.3.5.1.2; Crisis Planning;124
6.3.5.1.3; Security Design;125
6.3.5.2; Strictly Governmental Reforms;126
6.3.6; Summary Implications;128
6.3.7;References;128
6.4;9 I Am Superman: The Federal Reserve Board and the Neverending Crisis;130
6.4.1; Bank Regulator or Monetary Authority;131
6.4.2; Monetary Policy and Prudential Regulation: Conflict of Visions;135
6.4.3; What Fed Independence;139
6.4.4; A Culture of Innovation;141
6.4.5; The True Nature of Credit Default Swaps;143
6.4.6; Toward A Rules-Based Regulatory System;144
6.4.7; An Objective Basis for Finance and Regulation;145
6.4.8; Supporting Financial Innovation;147
6.4.9; Proposals for Improving Financial Regulation;150
6.4.10; The Neverending Crisis;152
6.4.11;References;154
6.5;10 How to Avoid the Next Taxpayer Bailout of the Financial System: The Narrow Banking Proposal;157
6.5.1; What Caused the Present Crisis;158
6.5.2; An Alternative Way to Deal with the Problems: Narrow Banking;160
6.5.3; Objections to the Narrow Banking Proposal;163
6.5.4; A Tripartite System;166
6.5.5; Conclusion;166
6.5.6;References;167
6.6;11 Regulation of Bank Management Compensation;170
6.6.1; Introduction;170
6.6.2; Evidence on the Relationship Between Bank Management Compensation and Performance;172
6.6.3; Bank Management Compensation, Risk, and Regulation: Theory;177
6.6.4; Regulation of Bank Management Compensation: An Evaluation;184
6.6.5; Conclusion;187
6.6.6;References;188
7;Part IV Legislation and Implications: The View from the Top;191
7.1;12 The Lure of Leveraging: Wall Street, Congress, and the Invisible Government;192
7.1.1; The Pre-2010 Framework of Financial Regulation;192
7.1.2; The Invisible Government;195
7.1.3; What Then Happened?;197
7.1.4; Congressional Accountability;199
7.1.5; The Responsibility of Regulators;203
7.1.6; Congressional Initiatives;208
7.1.7; Internet Gambling;213
7.1.8; Lobbying;214
7.1.9; Keynes vs. Friedman;215
7.1.10; The Who and What of Regulation;216
7.1.11; A Final Perspective;217
7.1.12;References;223
7.2;About the Editor;225
7.3;About Networks Financial Institute;226
7.4;About the Contributors;227
7.5;Index;231