Former Fed Chief Volcker Says Financial System is Insolvent
and Broken
2010 Sep 27
Paul Volcker, former head of the American central bank Federal Reserve,
announced last Thursday at a conference of the Federal Reserve Bank of
Chicago that the US financial system is largely insolvent and "broken".
Volcker indicated that not only the banks are to blame for this
situation, but also the federal regulators.
During the last few years, they could have tried a lot harder to stop
the investment banks from turning the global markets into a casino.
The investment banks were also responsible for attracting large parts
of the former core business of the commercial banks, which consequently
led to major problems, as everyone could now see.
Thus, Volcker considered that the credit business generally had taken
a negative path.
The size of the losses from toxic assets so far hidden by banks
would not be assessable anymore.
Therefore it would not be hard to imagine that the present situation
holds big risks for the future stability of the financial system
as well as for the broader economy.
He blamed the international central banks of overshooting the mark,
when trying to acquire skills that were not part of their original
fields of activity.
Additionally, a lax monetary policy stirred up the existing
problems instead of tackling them.
Volcker added that he was not sufficiently content with the new
financial markets bill, since the legislation, known as Dodd-Frank,
and the included Volcker rule, was strongly diluted
by individual lobbies.
Nowadays it was not the financial regulators, who provided the
banks and lenders with rules that generally had to be observed.
In fact, a major part of the market participants resented the
financial authorities, since they find the regulations disruptive
and bad for business.
He lambasted a lack of respect that led to a refusal to obey
the federal rules and to fully execute them.
Volcker described the American mortgage market as "completely broken".
It would take a long time to get the problems of the housing
market under control and to reinstall an economic equilibrium.
This situation would weigh on the economic development for a long time,
since it causes a big problem for the American consumer and has
already led to huge wealth destruction.
by Roman Baudzus writes --
Published by GoldMoney
Goldstone Announces Management Change and Appointment of Director
http://www.marketwire.com/press-release/Goldstone-Announces-Management-Change-and-Appointment-of-Director-TSX-GRC-1325224.htm
and Broken
2010 Sep 27
Paul Volcker, former head of the American central bank Federal Reserve,
announced last Thursday at a conference of the Federal Reserve Bank of
Chicago that the US financial system is largely insolvent and "broken".
Volcker indicated that not only the banks are to blame for this
situation, but also the federal regulators.
During the last few years, they could have tried a lot harder to stop
the investment banks from turning the global markets into a casino.
The investment banks were also responsible for attracting large parts
of the former core business of the commercial banks, which consequently
led to major problems, as everyone could now see.
Thus, Volcker considered that the credit business generally had taken
a negative path.
The size of the losses from toxic assets so far hidden by banks
would not be assessable anymore.
Therefore it would not be hard to imagine that the present situation
holds big risks for the future stability of the financial system
as well as for the broader economy.
He blamed the international central banks of overshooting the mark,
when trying to acquire skills that were not part of their original
fields of activity.
Additionally, a lax monetary policy stirred up the existing
problems instead of tackling them.
Volcker added that he was not sufficiently content with the new
financial markets bill, since the legislation, known as Dodd-Frank,
and the included Volcker rule, was strongly diluted
by individual lobbies.
Nowadays it was not the financial regulators, who provided the
banks and lenders with rules that generally had to be observed.
In fact, a major part of the market participants resented the
financial authorities, since they find the regulations disruptive
and bad for business.
He lambasted a lack of respect that led to a refusal to obey
the federal rules and to fully execute them.
Volcker described the American mortgage market as "completely broken".
It would take a long time to get the problems of the housing
market under control and to reinstall an economic equilibrium.
This situation would weigh on the economic development for a long time,
since it causes a big problem for the American consumer and has
already led to huge wealth destruction.
by Roman Baudzus writes --
Published by GoldMoney
Goldstone Announces Management Change and Appointment of Director
http://www.marketwire.com/press-release/Goldstone-Announces-Management-Change-and-Appointment-of-Director-TSX-GRC-1325224.htm
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