Geithner weapons of financial sector reform in the pages of WSJ

Geithner weapons of financial sector reform in the pages of WSJ

Washington : DC : USA | Mar 02, 2012 at 12:00 PM PST
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U.S. Finance Minister Timothy Geithner explains in "The Wall Street Journal," the cause of the financial crisis from 2008-2009, to protect the financial sector reform, without which - in his opinion - no way will continue to protect against further crises.

"Four years ago, on an evening in March 2008, I received a call from the CEO of Bear Stearns informing me that they planned to file for bankruptcy in the morning " - the head of the U.S. Finance Ministry says the days on which the financial crisis erupted to protect Americans against what he calls "financial amnesia."

The fact that Americans have forgotten the reasons for the late master crises, became the basis of financial collapse in 2008 - says Geithner. - I do not remember that the crisis leads to lack of proper, clear regulations and supervision of the various sectors of the economy.

Bear Stearns, has created a "perfect blend", too many financial risks: rely on risky short-term loans, of billions of dollars, and invested the money in thousands of derivatives contracts. In this way, the bank became the first victim of the breakdown in 2008 - reminds of the Exchequer. Then it was a domino effect.

Lack of regulation of the banking system, lack of risk assessment by regulators, lack of consumer support made; that millions of Americans are in arrears by charging a mortgage, then, when rising interest on loans they could not refinance them again, because the value of their homes dropped, leading to occupy the property by the banks and the next, a dramatic fall in the value of those homes. In this way, the offence the spiral of the crisis, which led on to the recession, eliminating jobs and long-term unemployment - Geithner goes on to explain mechanisms of failure in 2008.

"It was partly the result of amnesia. No memory of the great crises, can not remember what can occur when a country allows it to al risks has grown beyond the safety net he needs the economy" - he writes of the Exchequer.

Congressional response to the crisis was the adoption of the so-called summer of 2010. Dodd-Frank (named for its sponsors: Senator Chris Dodd and Congressman Barney Frank), which introduced a system of "safer, more modern regulation (...) the financial sector," as Geithner estimated.

Attempts to appeal these regulations, promoted by lobbyists on behalf of interest groups, are - according to Minister of the Treasury - proof that Americans have forgotten how best to complete economic collapse were the United States during the crisis.

Geithner calls for maintaining supervision of banks and other financial institutions, writing that "the great mistake of Congress would bend under pressure from lobbyists and back off large areas of the financial sector from regulation to protect against fraud."

According to the U.S. Treasury, if the reforms similar to the Dodd-Frank Act where have been an introduced a decade earlier, the proliferation of bad loans "would be less dangerous, and consumers would not be so vulnerable to abuse by banks and similar institutions."

"These reforms are worth to fight for their behavior - concludes Geithner - because we can not afford to forget lessons of the crisis."

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U.S. Treasury Secretary Geithner speaks during a news conference on the state of financial reform at the Treasury Department in Washington
U.S. Treasury Secretary Geithner speaks during a news conference on the state of financial reform at the Treasury Department in Washington
amagda is based in London, England, United Kingdom, and is a Reporter on Allvoices.
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