Press Releases
Fixing Finance: How to prevent a recurrence of the global economic crisis
15 Jun 2009
New book by Breakingviews.com
As Europe prepares to discuss new financial regulation this week, Breakingviews.com launches a manifesto to prevent a repeat of the crisis that has made such a mess of the global economy.
Unemployment is soaring across the globe, trillions of dollars of wealth have been destroyed and taxpayers will have to spend many years repaying the mountains of debt governments have incurred to fight the crisis.
The world needs to ensure that a financial crisis this severe does not recur. But what exactly should be done?
Fixing Finance, a new book by Breakingviews.com, has the answers. It contains a series of ideas which are at the cutting edge of the debate over what to do.
The book is published in the same week that European Union leaders are gathering to debate the future of financial regulation, and ahead of the release of the UK government’s White Paper on regulation.
Breakingviews.com sets out four principles:
- The world needs protecting from banks that are “too big to fail”. Financial companies must be cut down to size, or mechanisms established to let them fail without bringing down the whole system.
- Companies and consumers should be prevented from taking on excessive debt. It is barmy to incentivise people with tax breaks to take on debt.
- Everybody in the financial markets must raise their game. Bankers should study financial history. Investors should do their homework. Directors should endure an inquisition to check they are up to the job.
- Global imbalances need to be tackled. So long as countries like the US and the UK run massive trade deficits financed by short-term borrowing, the world will be vulnerable to crises.
These principles are backed up by a series of key recommendations (see below).
“A good crisis must not be wasted,” says Hugo Dixon, editor-in-chief of Breakingviews.com. “We must make sure that the right regulatory framework is put in place so that similar mayhem never occurs again.”
Notes to editors:
Hugo Dixon is available for interviews on the ideas contained in this book – and to comment, in general, on the future structure of financial regulation.
Please contact Rory Jones
+44 (0)20 7256 9333; + 44 (0) 7594 350 805
email: rory.jones@breakingviews.com
Fixing Finance can be purchased online for £10/$15.
www.breakingviews.com/books
This edition of the book has been sponsored by Alvarez & Marsal, the restructuring experts.
Breakingviews.com Key recommendations for fixing finance
• Require banks to stash away provisions in good times
• Eliminate tax deductibility of corporate interest but cut corporate tax rates
• Central banks should charge upfront for acting as lenders of last resort
• Impose stricter loan-to-value ratios for mortgages
• Regulate giant financial institutions more tightly than smaller ones
• Set up a global bankruptcy regime to allow giant banks to fail safely
• Governments with trade deficits should run budget surpluses
• Banks that finance forex carry trades should hold more capital
• Encourage long-term pricing in commodity markets
• Regulate hedge funds’ access to leverage via their prime brokers
• Don’t push up base salaries just because bonus has become a dirty word
• Pay regulators more
• Require bankers to study financial history
• Regulators should grill bank bosses to ensure they’re up to the job
• Don’t bring in a new “Glass-Steagall” Act
• Don’t ban short-selling
• Don’t fiddle with mark-to-market accounting
