Thursday, March 5, 2009

It's Global


Yesterday I had the opportunity to listen to Gordon Brown, the Prime Minister of Great Britain, speak to a joint session of Congress. Brown came to talk about the up coming economic conference to take place next month in Europe. The Prime Minister laid the ground work for the need for international cooperation to bring the economies of the world back from the recession that nearly all of the large economies of the world are now experiencing. Even the Prime Minister recognizes that the philosophy of deregulation does not work in an age of global financial dealings. As I have written before, banking and the underwriting of credit in the 21st century is the realm of structured financial debt instruments. And, going forward, if mortgage-backed bonds, manufactured housing-backed bonds, car loan bonds and credit card debt bonds are going to play a viable part in the world wide bond market, then something must be done to raise and restore the creditability of the credit rating agencies (CRAs). Without meaningful credit ratings for structured debt obligations, there can be no world wide bond market. And, without a world wide bond market, the flow of credit from the borrower to the investor can not be completed. Without repeating myself, as I have written about this before, the need to address the problems surrounding the CRAs and their conflict of interest with the bond underwriters of the collateralized mortgage obligations (CMOs), the bond market meltdown and the issue of toxic assets can not be resolved. I hope that participants in the economic conference next month in Europe are serious about their recognition of the importance of world wide cooperation with regard to the implementation of meaningful banking and securities regulations.

Stay tuned.

2 comments:

LceeL said...

Would it not be nice if there could be a way to take some of the volatility out of financial markets?

moneythoughts said...

Information and opinions move markets; however, it is not the volatility that is the problem as much as the lack of confidence in the ethics which stand behind the securities that the markets trade. Markets must be free to operate, or else people will not make markets and risk their capital. Investors must have confidence in the process. When no one has confidence, there are no markets being made.