Posts Tagged ‘Securities and Exchange Commission’
Wednesday, February 1st, 2012
The federal Commodity Futures Trading Commission (CFTC) proposed limiting banks’ proprietary trading and hedge fund investments under the Dodd-Frank Act’s Volcker rule. The CFTC 3-2 vote makes it the last of five regulators to seek public comment on the proposal. This vote opens the measure to 60 days of public comment. The rule, named for former Federal Reserve Chairman Paul Volcker, was included in Dodd-Frank to rein in risky trading at banks that benefit from federal deposit insurance and Fed discount window borrowing privileges.
The CFTC stayed mum when the Fed, Federal Deposit Insurance Corporation, Securities and Exchange Commission and Office of Comptroller of the Currency released their joint proposal last year. The four agencies extended the comment period on their proposal until February 13 after financial-industry groups and lawmakers cited the complexity of the rule and the lack of coordination with the CFTC in requesting an extension.
The CFTC may soften Dodd-Frank a bit, granting Wall Street banks exceptions to rules requiring dealers to sensibly believe their derivatives are suitable for clients and in the best interests of endowments and other so-called special entities. The rules “implement requirements for swap dealers and major swap participants to deal fairly with customers, provide balanced communications, and disclose material risks, conflicts of interest and material incentives before entering into a swap,” CFTC Chairman Gary Gensler said.
Opponents say the CFTC proposal would cause “severe market disruption” by transforming the relationship between swap dealers and clients such as pensions and municipalities, according to Sifma and the International Swaps and Derivatives Association, Inc.. Under the final rule, dealers must disclose material risks and daily mid-market values of contracts to their clients. The CFTC may also complete rules designed to protect swap traders’ collateral that is used to reduce risk in trades. The rule insulates the collateral if the broker defaults, while allowing the customer funds to be pooled before a bankruptcy, according to a CFTC summary of the regulation.
Commissioner Scott O’Malia voted in favor or the rule, but said he did not want to give market participants “a misleading sense of comfort” that it would have prevented the loss of customer money at the brokerage giant. “This rulemaking does not address MF Global,” O’Malia said. “This rulemaking would not have prevented a shortfall in the customer funds of the ranchers and farmers that transact daily in the futures market. Nor would it have expedited the transfer of positions and collateral belonging to such customers in the event of a collapse similar to that of MF Global.”
Commissioner Jill Sommers, who voted against the rule, criticized the rule for doing nothing to protect a futures commission merchant’s futures customers. “Given recent events, we need to re-think this approach so we can provide adequate protections, in a comprehensive and coherent way, to swaps customers and to futures customers,” Sommers said. “I do not favor a piecemeal approach to customer protection.”
Tags: bankruptcy, Commodity Futures Trading Commission, Dodd-Frank Act, Federal Deposit Insurance Corporation, Federal Reserve, Hedge fund investment, Inc., International Swaps and Derivatives Association, MF Global, Office of Comptroller of the Currency, proprietary trading, Securities and Exchange Commission, Sifma, Volcker Rule, Wall Street
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Wednesday, December 14th, 2011
Facebook is contemplating the idea raising about $10 billion in an IPO that would value the predominant social-networking website at more than $100 billion. At $10 billion, the offering would raise significantly more money than any other technology IPO, and Facebook expects investors to be eager to buy into the social-networking company. The IPO would overshadow that of the previous record holder, Infineon Technologies AG, which generated $5.23 billion in its 1999 debut. Agere Systems Inc., which raised $4.14 billion in 2000, currently occupies second place.
Mark Zuckerberg, Facebook’s 27-year-old founder and CEO, will undoubtedly be rewarded by the website’s rise. A valuation of $100 billion will further increase Zuckerberg’s net worth which had earlier been estimated at $17 billion, according to Forbes magazine.
Facebook expects federal regulators to call for the firm to disclose its financial results by April 30, 2012 — if it doesn’t go public sooner. Facebook chose to wait until next year to launch its IPO to give CEO Mark Zuckerberg extra time to add users and increase sales. Facebook, which has a staggering 800 million users, is also increasing its focus on mobile technology, aiming to leverage the shift to smart phones and tablets. The firm expects its next billion users to connect primarily via mobile devices, rather than desktop computers.
Zuckerberg noted that an IPO isn’t something he has spent “a lot of time on a day-to-day basis thinking about. We’ve made this implicit promise to our investors and to our employees that by compensating them with equity and by giving them equity, that at some point we’re going to make that equity worth something publicly and in a liquid way. Now, the promise isn’t that we’re going to do it on any kind of short-term time horizon. The promise is that we’re going to build this company so that it’s great over the long term. And that we’re always making these decisions for the long term, but at some point we’ll do that.
Writing in the New York Times’ “Deal Book” column, Steven M. Davidoff isn’t certain that this is the correct time for a Facebook IPO. “Facebook is in a corner. Another Internet hotshot, Groupon, is trading below its offering price, and the market for internet initial public offerings over all appears to be deflating. The European sovereign debt crisis isn’t helping the market gloom. The coming months are shaping up to be a bad time to undertake an IPO. Still, Facebook will almost certainly have to go public during this time whether it wants to or not — and whether or not it can get a valuation of $100 billion or more in doing so. And it’s partly Facebook’s fault — it just has too many shareholders. Securities regulation requires a United States company with 500 or more shareholders of record to begin filing reports, including audited financial information, with the Securities and Exchange Commission four months after the year it exceeds this threshold. Facebook most likely exceeded 500 shareholders this year. By the end of April 2012, it will become subject to this heightened regulation and have to disclose a spate of confidential business information.”
What does the prospect of an IPO mean to potential investors? TechCrunch writer Josh Constine wasn’t optimistic in a post bluntly titled “Why Greedy Stockholders and a $100 Billion IPO Could Hurt Facebook.” Constine says that if Facebook becomes subject to the desire of its stockholders, the site will innovate less by making profit a higher priority than user experience. For example, more ads are likely to pop up on users’ pages. “Outside stockholders could detract from Facebook’s vision and momentum,” he wrote. “They could push for faster returns, and pressure the company to display more ads, turn mobile into a direct revenue stream, and play it safe with product. This might produce short-term gains, but could hamper what CEO Mark Zuckerberg has built into a core communications utility for the world.”
Tags: Agere Systems, European sovereign debt crisis, Facebook, Groupon, Inc. Smart phones, Infineon Technologies AG, IPO, Mark Zuckerberg, Securities and Exchange Commission, SharesPost Inc., Social network, Tablets
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Monday, June 27th, 2011
Facebook is likely to file for an initial public offering (IPO) as early as October or November that could value the popular social networking site at more than a whopping $100 billion. Goldman Sachs is the top candidate to manage the lucrative offering, which could come in the 1st quarter of 2012. Facebook, whose chief operating officer last month called an IPO “inevitable,” made no comment on the report.
The company’s IPO likely would probably be prompted by a section of the 1934 Securities and Exchange Act known as “the 500 rule” At heart, the rule mandates that once a private company has more than 500 investors, it must release quarterly financial information to the Securities and Exchange Commission, just as public companies do. Facebook, which is likely to cross the 500-investor threshold this year, would probably launch a formal IPO in advance of a public-company reporting obligation that would be required next April. Another factor motivating the IPO, according to people familiar with the plans, is Facebook’s wish to increase employee compensation. Early in 2010, Facebook curbed employees’ ability to sell their company shares privately to other investors — a move that may now be prompting employees to quit Facebook so they can monetize their shares. If the company goes public, however, employees will be able to sell their stock on the open market, allowing them to cash in on their holdings.
“Unable to sell their private shares, Facebook employees are growing restless,” according to Kate Kelly at CNBC. “An initial public offering is expected. A factor in the company’s IPO timing is the Securities and Exchange Commission’s requirement that some companies like Facebook must disclose financial information if they have more than 500 private investors.” The IPO speculation and record high valuation is comes on the heels of recent numbers showing declining user-ship in some of Facebook’s leading markets.
Writing in the Wall Street Journal, Shira Ovide says that “Facebook is on track to exceed $2 billion in earnings before interest, taxes, depreciation and amortization for 2011. That’s even higher than the expected 2011 profit circulated in the early part of the year when Goldman Sachs and Russian investment house Digital Sky Technologies invested in Facebook at a $50 billion valuation. If Facebook ends the year with $2 billion in Ebitda, would IPO investors stomach a 50 times trailing multiple valuation? Seems bubble-like. Trust us. Wall Street bankers, lawyers, P.R. mavens, caterers and everyone else are slobbering for a slice of the Facebook IPO magic. Facebook has been meeting with potential bankers that want to shepherd the IPO. Goldman Sachs is thought to have an inside track to lead the IPO thanks to its recent investment in Facebook, but don’t count out big banks such as J.P. Morgan and Morgan Stanley, which have led recent big tech IPOs. Facebook CEO Mark Zuckerberg has been non-committal about an IPO for a long time. As recently as December, Zuckerberg gave his weird deer-in-headlights stare when ’60 Minutes’ asked him whether he would ever push his baby into the public markets. ‘Maybe’ was Zuckerberg’s answer. But momentum is taking over.”
Not so fast, says Fortune magazine’s Dan Primack. According to Primack, “Pay attention to news that Facebook is planning its IPO. But take its proposed valuation with a grain of salt. First, the most recent private trades of Facebook stock came in at around $85 billion, and private trades are meant to be done at a discount to public valuations. LinkedIn shares, for example, traded at $23 per share on the private markets six months before going public at $45 per share. At that velocity, Facebook actually would be valued at $165 billion next January. More importantly, it’s impossible to intelligently speculate on an Internet company valuation 6-10 months out. Will the bubble still be inflating? Will it have popped? Will macro trends have continued their anemic recovery, or double-dipped back down? Facebook is probably immune to the timing issues related to IPO windows, but it does not stand apart from the economy at large. If we experience a massive advertising pullback, for example, then Facebook could take a hit in its largest revenue pot (or at least a growth slowdown). Not saying that will happen, but obviously it could. To me, the only value in today’s ‘$100 billion’ report is in referring back to it when the company has an actual public valuation.”
Tags: 1934 Securities and Exchange Act, CNBC, Digital Sky Technologies, e-G8 forum, Ebitda, Facebook, Goldman Sachs, IPO, JP Morgan, Kate Kelly, LinkedIn, Mark Zuckerberg, Morgan Stanley, News Feed, Securities and Exchange Commission, social networking, The “500” rule, Wall Street
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Monday, March 7th, 2011
Republican congressmen searching for sizeable spending cuts are targeting Wall Street’s regulators over a plan to slash millions from the budgets of several vital agencies. They are setting their sights on the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). The workload of both agencies is expected to increase significantly as the Dodd-Frank financial reform law is implemented. House Republicans want to slash the CFTC’s funding by $56.8 million – nearly 33 percent of the agency’s entire budget — over the next seven months. The SEC’s funding would be cut by $25 million over the same time.
CFTC Chairman Gary Gensler said he would have no option but to reduce his staff from 680 to fewer than 440 if the cuts are approved. “We’d have to have significant curtailment of our staff and resources,” Gensler said. “We would not be able to police…or ensure transparent markets in futures or swaps.” Under Dodd-Frank, the CFTC regulates the multi-trillion dollar derivatives market that includes over-the-counter products called credit default swaps. The story is similar at the SEC, which is working to augment its enforcement of Dodd-Frank. “It (budget cuts) will have a very real effect on the SEC’s ability, not just with respect to Dodd-Frank implementation, but also with respect to our core mission,” SEC Chairman Mary Schapiro said in testimony before Congress.
Leading the charge in Congress is Representative Randy Neugebauer, chairman of the House Financial Services Subcommittee on Oversight and Investigations. One of Neugebauer’s top priorities is assuring that regulators are not “overreaching” and moving too quickly with their new authorities under Dodd-Frank. Neugebauer expressed concern about whether regulators are adequately performing cost-benefit analyses on every rule in Dodd-Frank, a process required under federal rule-making procedures. He expects to call SEC Chairman Schapiro and CFTC Chairman Gensler back to testify about the issue, especially since he believes that Gensler gave him “vague” responses about cost-benefit analyses on derivatives rules. Neugebauer said another of his major priorities will be to rein in the powers of the Consumer Financial Protection Bureau, an entity created under Dodd-Frank. The Texas congressman wants to move the bureau to the Treasury Department and out of the Federal Reserve’s control.
Another congressional Republican makes this point. “When the House and Senate passed the Dodd-Frank Act, supporters continually purported that small financial institutions, like many I represent, were exempt,” Representative Shelley Moore Capito, (R-WV) said. “As the provisions of Dodd-Frank are going through the rule making process, I am starting to hear concerns from small institutions about the unintended consequences that could adversely affect them.”
One point of contention with the Republicans is the orderly liquidation provision that authorizes regulators to seize large financial institutions that are about to fail and dismantle them in a way that is less disruptive than either taxpayer bailouts or bankruptcy.
“People are saying we won’t have the guts” to invoke orderly liquidation, acknowledged Democratic Representative Barney Frank, (D-MA), who co-sponsored the legislation with now-retired Senator Christopher Dodd (D-CT). “Well, we had the guts with regard to the TARP to get the money back. We got it back,” he said, referencing the $700-billion Troubled Asset Relief Program (TARP) that bailed out Wall Street firms and which has been largely repaid. “I don’t have any question that we’re going to go through with it,” Frank said.
Tags: bankruptcy, Commodities Futures Trading Commission, congress, Consumer Financial Protection Bureau, credit-default swaps, Derivatives markets, Dodd-Frank Wall Street reform law, Federal Reserve, Financial regulators, Gary Gensler, House Financial Services Subcommittee on Oversight and Investigations, Mary Schapiro, Orderly liquidation, Representative Barney Frank, Representative Randy Neugebauer, Representative Shelley Moore Capito, Republicans, Securities and Exchange Commission, Senator Christopher Dodd, TARP, taxpayer bailouts, Treasury Department, Wall Street firms, Wall Street reform, “Too big to fail”
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Wednesday, February 9th, 2011
Implementation of the historic Dodd-Frank bill – which President Barack Obama signed into law last July to regulate Wall Street against the excesses that led to the Great Recession — is in danger of being gutted if Republicans’ proposed deep spending cuts become a reality. Representative Barney Frank (D-MA) pointedly criticized Republicans’ proposal to slash government spending to 2008 levels. According to Frank, that is not an option because the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) need funding to hire hundreds of employees to write and issue regulations to give the new law teeth. Frank co-sponsored the bill with former Senator Christopher Dodd (D-CT).
Unfortunately, the positive things that Dodd-Frank was designed to accomplish have run head on into the non-partisan Congressional Budget Office’s (CBO) bleak warning about the direction of the nation’s debt. According to NPR Planet Money correspondent David Welna, “It was not a pretty picture that CBO director Douglas Elmendorf painted as he sat before the budget committee”. This year’s deficit, he said, will be nearly $1.5 trillion dollars, nominally the largest in history. And if the tax breaks that got extended this year continue throughout the next decade, Elmendorf said the nation’s debt would grow to be the size of its economy, something that hasn’t happened since the end of World War II. The time to do something about it, he told the grim-faced panel of senators, is now.”
Elmendorf warned that “The longer the necessary adjustments are delayed, the greater will be the negative consequences of the mounting debt, the more uncertain individuals and businesses will be about the future government policies, and the more drastic the ultimate policy changes will need to be.” Senator Kent Conrad (D-ND), chairman of the Senate Budget Committee, said “The thing that makes the most sense is there is a summit between the White House, leaders in the House and the Senate, because at the end of the day, the White House has got to be at the table. And unfortunately, during the budget process, the president is left out.” NPR’s Welna continues, “The revenue side of the equation, of course, is taxes and raising them has been a taboo topic for most in the GOP. But the likely need for more revenues was underscored toward the end of today’s hearing when Conrad noted that the Social Security surplus that lawmakers have been raiding for years disappeared this year and instead, Social Security has started cashing in its IOUs with the Treasury.” Social Security will post nearly $600 billion in deficits over the next 10 years as the economy recovers and millions of baby boomers begin retiring, according to new congressional projections.
House Republicans, led by Representative Scott Garrett (R-NJ), chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, wants to cut $55 to $60 billion in non-defense spending during fiscal year 2011. “A dramatic spending increase to fund the SEC and CFTC, as envisioned by the authors of the Dodd-Frank legislation, would further the mindset that our nation’s problems can be solved with more spending, not more efficiency,” according to Garrett. Frank countered that Garrett’s comments only reinforce his “fear that Republicans are attempting to cripple regulation by failing to fund it. I had thought even among people in the Tea Party that credit default swaps were not that popular. We’re arguing the security of the average American was far more endangered by the financial crisis than by a lot of other things that our military does.”
If the cuts are put into place, the SEC and CFTC would be frustrated in their mandates, such as setting up a new office of municipal securities, according to Frank. The Republican response to Democratic concerns is that their goal is to make federal regulators more efficient. Representative Spencer Bachus (R-AL), chairman of the House Financial Services Committee, said “Past experience indicates that a few investigative reporters have been more effective than the many employees at the SEC in addressing and exposing financial wrongdoing.”
Tags: Commodity Futures Trading Commission, Congressional Budget Office, credit-default swaps, David Welna, Department of the Treasury, Dodd-Frank bill, Douglas Elmendorf, Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, Gary Gensler, GOP, Great Recession, House Financial Services Committee, Inc., Non-defense spending, NPR, Planet Money, President Barack Obama, Representative Barney Frank, Republican Study Committee, Republicans, Scott Garrett, Securities and Exchange Commission, Senate Budget Committee, Senator Christopher Dodd, Senator Kent Conrad, social security, Spencer Bachus, Tea Party, Wall Street Lehman Brothers Holdings
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Thursday, September 16th, 2010
The alternative investment management business will undergo major changes, thanks to passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Although no specific rules have yet been written, the Wall Street reform law could impact investment returns, leverage and risk-taking, innovation and transparency of private equity, real estate and hedge fund managers.
“This will change the way alternative investment businesses are run. They will have to use more capital and less leverage and less risk-taking,” said Henry Kahn, partner in the law firm Hogan Lovells. “This fundamentally changes what types of businesses financial services are in.” The large financial services firms now must choose which lines of alternatives business they will keep and how they will be set up. Smaller firms might have to deal with Securities and Exchange Commission (SEC) registration for the first time. This will give the world – and regulators – an inside look at their investment strategies, which they do not welcome.
Investors are concerned that increased transparency and greater oversight by the SEC will make investment managers less willing to be innovative because their proprietary strategies will be open to review by regulators and their competitors. According to Kahn, “Some large institutional clients are concerned that regulations will put additional costs on medium-size advisers and inhibit beneficial innovation in investing.”
Tags: Barney Frank, Christopher Dodd, hedge funds, investors, non-financial services, Securities and Exchange Commission, Wall Street
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Wednesday, April 14th, 2010
Senator Christopher Dodd (D-CT), chairman of the Senate Banking Committee, introduced revised legislation to regulate the nation’s financial system. The plan would create a nine-member council, led by the Treasury secretary, to be on the alert for systemic risks, and direct the Federal Reserve to oversee the nation’s largest and most interconnected financial institutions.
The bill, which would be the most comprehensive change in financial rules since the Depression, would preserve much of the existing regulatory system, which has been criticized as being too disjointed. Additionally, it would rely on a new mechanism for seizing and liquidating large financial companies on the verge of failure. This would reduce, but not eliminate, the possibility of future bailouts.
The legislation incorporates a version of the Volcker Rule, a proposal from former Federal Reserve Chairman Paul Volcker that would make certain that legislators ban banks from investing in or owning hedge and private-equity funds. Republicans and Wall Street strongly object to that idea. Dodd’s legislation takes a fairly tough line with financial firms in general. The proposed consumer protection agency would be given the authority to write and enforce rules for banks with more than $10 billion in assets. The oversight also would apply to mortgage companies, credit card issues and other lenders – a move that Republicans oppose.
“Our regulatory structure, constructed in a piecemeal fashion over many decades, remains hopelessly inadequate,” Dodd, who is retiring from the Senate at the end of this term, said. “There hasn’t been financial reform on the scale that I’m proposing this afternoon since the 1930s…. It is certainly time to act.”
Tags: Christopher Dodd, department of treasury, Federal Reserve, lobbyists, Paul Volcker, Securities and Exchange Commission, Standard & Poors 500, Volcker Rule, Wall Street
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Monday, February 22nd, 2010
An independent audit released by the bipartisan Congressional Oversight Panel (COP) has found the $700 billion Troubled Asset Relief Program (TARP) to be effective, so much so that the Department of the Treasury has extended it to October 3, 2010. Treasury Secretary Timothy Geithner plans to use the remaining funds to assist families facing foreclosure and give loans to small businesses.
The COP was unable to fully gauge TARP’s impact because of other forces such as the $787 billion American Recovery and Reinvestment Act, tax cuts and actions by the Federal Reserve and Federal Deposit Insurance Company. “Even so, there is broad consensus that the TARP was an important part of a broader government strategy that stabilized the U.S. financial system by renewing the flow of credit and averting a more acute crisis,” according to the report. “Although the government’s response to the crisis was at first haphazard and uncertain, it eventually proved decisive enough to stop the panic and restore market confidence.”
That said, after 14 months of TARP, the panel admits that problems remain. Banks are still skittish about making loans, toxic mortgage-related assets are still sullying banks’ balance sheets and smaller banks are susceptible to difficulties in the commercial real estate sector. And, with 13 million additional home foreclosures expected over the next five years, “TARP’s foreclosure mitigation programs have not yet achieved the scope, scale and permanence necessary to address the crisis.”
Repayments from banks that received TARP dollars are expected to total $116 billion, including $45 billion that is being returned by Bank of America. The government is likely to receive as much as $175 billion in repayments from companies it rescued by the end of 2010.
Tags: AFL-CIO pension fund, American Recovery, bailouts, Bank of America, Congressional Oversight Panel, department of treasury, Federal Deposit Insurance Company, Federal Reserve, Harvard Law School, Main Street, President Obama, Securities and Exchange Commission, TARP, Timothy Geithner, Wall Street
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Wednesday, June 3rd, 2009
It’s no surprise that investors are still wary of investing in derivatives, given the financial devastation that these vehicles’ collapse caused last year. Proof of the fact is that the IPO of a financial instrument designed to be on American home prices failed because its auction did not generate adequate investor interest.
According to its Securities and Exchange Commission filing, MacroMarkets turned down all auction bids because there was an “insufficient demand for an equal number of Down and Up shares”. In other words, MacroMarkets was forced to abandon the auction process because the offering would work only if there was an equal number of shares in both the “up” and the “down” trusts – and if each pair of shares totaled $50. The firm had initially set a minimum closing investment pool of $125 million, though CEO Sam Masucci did not disclose the value of the bids received before pulling the plug.
MacroMarkets sought out investment from homebuilders and banks who want to hedge their housing exposure, as well as foreign investors seeking a stake in U.S. real estate. The problem is that investors had difficulty valuing the shares because it meant predicting the movement of the 10-city index on which the offering was based. That’s not easy in a housing market where prices may not have bottomed out yet.
When housing trusts eventually restart, their shares will trade under the symbols UMM for “up” and DMM for “down” on the NYSE Arca, the New York Stock Exchange’s all-electronic U.S. trading platform.
Tags: auction, auction bids, banks, derivatives, DMM, Down and Up shares, financial devastation, financial instrument, foreign investors, home, home prices, homebuilders, housing exposure, housing market, housing trusts, interest, investing, investment, investment pool, investor, investors, IPO, MacroMarkets, New York Stock Exchange, NYSE Arca, Sam Masucci, Securities and Exchange Commission, UMM, US real estate, US trading platform, value
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Tuesday, April 21st, 2009
The Obama administration has proposed the most comprehensive overhaul of the nation’s financial industry since the Great Depression. The measures, as outlined by Secretary of the Treasury Timothy Geithner, 
will require regulation of hedge funds for the first time and give government wide-ranging powers to seize and take apart companies that are perceived as threats to the overall economy. The proposals are strong medicine indeed.
The measures, which require Congressional approval, are structured to entice private buyers by offering the similar supercharged leverage that prevailed during the financial boom-but one where oversight is de rigueur. While the private sector is cutting back on its debt, the government believes that providing inexpensive financing is the best way to free up the market for illiquid debt.
The proposals give the Federal Reserve the authority to oversee the nation’s economy for signs of “systemic risk”. The legislation will include significantly stronger requirements regarding the cash reserves and assets that institutions must have on hand to endure economic downturns. Hedge funds, private-equity firms, derivatives and other private investment funds will be required to register with the Securities and Exchange Commission and will be subject to strict regulation. Additionally, the government will establish a central clearinghouse to closely monitor trades in these markets. Lastly, the administration will develop stricter requirements for money market funds so withdrawals don’t threaten the broader financial system.
Harsh medicine indeed, but the old system failed us all. Secretary Geithner sees his proposals as a price worth paying to clean out banks’ balance sheets. If the plan fails, it will be because banks were not willing to risk of taking a write-down and depleting precious capital.
Tags: assets, capital, cash reserves, Congressional approval, debt, economy, Federal Reserve, financial boom, financial industry, financial system, Great Depression, hedge funds, money market funds, Obama, Obama administration, private-equity firms, Secretary Geithner, Securities and Exchange Commission, systemic risk, Timothy Geithner
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