President Obama attacks critics of bank reform bill

Wall Street has no other choice but to embrace financial reform whether or not they like it. This is the only industry that I know of where firms undertake actions that are detrimental to the long term survival of themselves and the industry as a whole. 

The surviving banks need to embrace reform. I just does not make sense to have a business model that is based on such catastrophic failure and systematic disruption of worldwide financial markets.

I lost faith in the principles underlying the financial markets after the 2008 financial meltdown but I have finally come to terms with the fact that there is a huge difference between normal business and economic cycles and the meltdown that occurred in 2008 which was mostly fueled by systematic and blatant fraud! A classic case of the emperor has no clothes on with all pretending as is everything was "honky-dory" fine even as the deck of card continued to unravel in a spectacular domino fashion.

I now realize that there is nothing wrong with the concepts underlying the valuation of financial assets -- I still believe in the Capital Asset Pricing Model (CAPM), Arbitrage Pricing Theory (AP) and other financial theories. I also believe derivatives such as the forward and futures markets are an essential part of doing business. The notion of hedging risk has been around for thousands of years and is not going to go away any time soon!

What I don't believe in is the unbridled greed that led to the collapse of the mortgage brokerage industry and eventual collapse and obliteration of several banks.

So Wall Street, like it or not -- here comes financial reform! Embrace it!


Page last updated at 17:15 GMT, Thursday, 22 April 2010 18:15 UK

President Obama attacks critics of bank reform bill

Barack Obama speaks about the 'absolutely essential' need for reform US President Barack Obama has attacked critics of his banking reforms in a speech which warned that without change the financial crisis will be repeated. Reckless practices and financial firms that acted like "bandits" should never be allowed to operate again, he said. Regulatory reform was in the financial sector's interests, and bankers and lobbyists should not fight against it. Mr Obama was speaking to an audience of bankers and financial experts at the Cooper Union college in New York. A bill proposing tighter regulation is due to be debated in the US Upper House, the Senate, next week. A free market was never meant to be a free licence to take whatever you can get Barack Obama Q&A: Bank reforms It was approved by the Lower House, the House of Representatives, in December.  The proposed rules would include a new body to safeguard consumers' rights - a consumer protection agency at the US central bank, the Federal Reserve - which would have powers to regulate all lending.  But many people in the financial sector are aghast at the proposed changes.  Mr Obama said that he was not, as some have argued, against the power of the free market.  Doomed to repeat "But a free market was never meant to be a free licence to take whatever you can get, however you can get it. That is what happened too often in the years leading up to the crisis," he told the New York audience. "Some on Wall Street forgot that behind every dollar traded or leveraged, there is a family looking to buy a house, pay for an education, open a business, or save for retirement.  "What happens here has real consequences across our country," he said.  "It is essential that we learn the lessons of the crisis, so we don't doom ourselves to repeat it."  Financial reforms would ensure that the markets no longer "operated in the shadows of our economy, invisible to regulators and to the public".  Abuses and excesses were rampant, the President said. But it was now essential that regulators had the power to "shut these firms down with the least amount of collateral damage to innocent people and businesses".  Read more: http://news.bbc.co.uk/2/hi/business/8636774.stm