Cornelius K. Hurley
Director, Boston University Center for Finance
Stephen Kingsley
Senior Managing Director, Economic Consulting, FTI Consulting
John C. Dugan
Partner, Covington & Burling
Mark Carawan
Chief Internal Auditor, Citigroup
Simon Samuels
Managing Director, European Banks Equity Research, Barclays Capital
Issue 6 - December 2011
The Impact Of Global Financial Reforms - continued
DUGAN: I’m not sure I agree with that, for the reason Bill said. I think bankers make money through loans and want to put that capital to work — especially in a low interest rate environment where they can’t earn much spread by investing in Treasury securities or Fed funds. So I think they have every
incentive to try to make loans right now; it’s just hard to find them.
HURLEY: And the No. 1 problem facing bank management these days is “What do we do with all this money?” Banks in New York have started charging large depositors to put deposits in the bank!
SAMUELS: I think one of the enduring features, post–financial crisis, is that the idea of a level playing field goes out the window. Take capital: If you’re a regulator of a very large banking system that collapsed, your view toward how that should be regulated would differ from the view of a regulator of a smaller banking system that didn’t collapse. And so the United Kingdom’s starting point is a banking system that is, depending on how you measure it, between five and six times the gross domestic product of the United Kingdom. The starting position of the United States is a banking position that is a tenth that size relative to the U.S. economy. And so the chances of those two regulators agreeing on the same magic capital ratio number, I’d say, is zero.
HURLEY: When we use the term regulation, it means different things to Republicans and Democrats [in the United States]. Just the word regulation has become an attack these days. Regulation comes in many forms — I have a list of about 35 different types. And some of those regulations are really designed to promote market discipline, especially in the area of disclosure. So often the debate about regulation or overregulation or underregulation ends up being just a political diatribe where the parties never really have a discussion. They never start from the point, “What are we trying to accomplish, and what is the least burdensome way of getting there?” If we could just have that discussion, we might get to a place that yields a stronger, more resilient financial system that fosters sustainable economic growth.
ISAAC: That is a perfect thought to end on, Con. I wish we could continue all day, as this has been a fascinating discussion. Thanks to each of our panelists for taking the time to share your thoughts and wisdom.