The economy of the powerful

The financial systems and financial markets determine the dynamics of investment
the world economy and the consequent effects on income, employment, consumption, on the
social cohesion, environmental quality, social relations.
Their regulation is the first necessary condition of stability and sustainable development
the global economy.
The reform of the banking and financial system pursued tenaciously by the Obama Administration
and approved by the Parliament of the United States July 21, 2010, radically alters the Federal
Reserve Act DSEL 1913 represents the most ambitious attempt and systematic control of the
Financial Markets Act (Dodd-Frank, 16 titles, over 2000 pages, referring to 243 regulations
implementation, 67 studies and 22 periodic reports).
The architecture and the effectiveness of a reform meritorious, courageous and complex occur, in opinion
Our in symptomatic subjects and discriminating about what was most bitter confrontation and
clash with the interests of the financial lobbies.
The road to reform began with a sensational goal formulated by P. Volker (the Volker
Rule) President of F.E.D. before A. Greenspan: separate, strictly, the areas of activity
of commercial banks and investment banks; direct commercial banks to
exclusive task of monetary (Collection / loans) excluding from the scope of the
their activities on the trading securities portfolio of properties (assuming only on behalf of the
customers) and participation in private equity funds or hedge funds; financial activity remained,
however, the sole object of investment banking.
The outcome was much more mediated, as a result of the offensive unleashed by the financial lobbies of
Wall Street and the opposition of the Republican Party which has been the sounding board policy.
The proprietary trading has also been confirmed for the commercial banks and the participation in
hedge funds and private equity permissible within maximum limits refer to the fund's capital
participated and the assets of the participating bank that will commence, respectively,, in
2012 and in 2017.
Relativize the principle of absolute separation between the finance function in respect of
regulatory constraints and operational means to postpone the effective application of the Regulations attuazioneed give more power to the Authorities for the supervision, subordinating, in the final
instance, to each other and to the success of the reform.
Appears no different underlying architecture with the rules relating to transactions in contracts and
derivative securities. The derivatives market has been, until now, especially in the segment "over the
counter "that is 90%, totally deregulated. So much so that, strictly speaking, could not
not even be defined as a market devoid of the minimum elements that allow you to evaluate the
products and to fix prices.
In 2008, at the peak of the euphoria schizophrenic market, the value of the derivative was equal to 24 times the
P.I.L. world (equal to about 53 trillion dollars). Today, after the crisis, is estimated to be 600
trillion dollars, 12 times the P.I.L. world.
And 'this is the paradigm of "efficient markets" and "rational expectations" claimed, even today,
dall'intruglio ideological liberalism, absolute indifference to the lessons imparted devastating
the crisis?
The reform has the merit of regulating the market "over the counter" through standardization
contracts (which defines the nature of the risk being hedged, or taken and the characteristics of the
contractors, allowing the comparison of standard products and the correct price fixing), the
centralization of trade (which ensures, thanks to a common counterpart, a Clearing
House, their regular course) and the dual supervision of the SEC (Security Exchange
Commission) and the C.F.T.C. (Commodity Futures Trading Commission). The negotiators operating in
derivatives market will be registered with the SEC and C.F.T.C. requirements and must possess
capital, equity, margin which should help to limit the effects iperpesculativi
of commodity futures.
The Dodd-Frank Act excludes, however, by setting the derivatives are not used for speculative purposes. Yes it is
is an exception that excludes relevant for this class of derivatives, the principles of
standardization and centralization breaching danger that threatens the weakening of
the whole architecture reform.
The debate and the institutional orientation in Europe is following the same approach: the
principle of regulation is waived and modulated depending on whether speculative activities or
not speculative, banks or non-financial firms, activities to systemic risk or no risk
systemic. The reference to the implementing regulations and secondary legislation will be consequent and
broad power of the Authorities.
The reform Obama establishes, moreover, the "Financial Stability Oversight Council," the Council of
monitoring of systemic financial stability of the country, with extensive powers of intervention
estimate (to prevent mergers, investments, alliances, prevent the supply of one or more products
financial; require brokers to close one or more activities; define the operating conditions
of one or more activities; ask the intermediaries to sell or transfer assets to non-
controlled); strengthens the powers of the S.E.C. (extending even to the supervision and inspections,
Rating Agencies until a subsequent withdrawal of authorization); creates the new "Bureau of ConsumerFinancial Protection" to protect consumers of financial products in terms
information, transparency, supervision.
Notes, however, in this context, unpretentious analysis and systematic evaluation of a reform
however imposing, bring out the potential weaknesses because late (after three years
beginning of the crisis), exposed to the risk of circumvention for stretch marks endogenous trend (reference
of starting dates to the times of the implementing regulations). Is particularly lacking alternative
effectively to the "Volker Rule" that could reside in a fiscal policy capable of selective
to pay the predatory finance the cost of the risk of negative externalities and systemic risks
favoring, on the contrary, the credit to the economy with tax advantages.
Europe has not followed the U.S. on the line of direct regulation. After a string of infinite
Summits between the Ministers of Economy and among the Heads of Government gave birth to ESMA (...). Authority the
European prudential supervision, operating since 1 January 2011 Watch is divided into two
levels. A macroeconomic level, represented by the European Systemic Risk Board (ESRB), which
assess, continuously, the risks to the stability of the financial system, will trigger alarms,
issue recommendations, monitor the adoption of the measures suggested. a level
microeconomic the European System of Financial Supervisors (ESFS) consisting of three autorities
respectively for the banking system, the insurance system and to the stock exchanges. three o'clock
Authorities will define jointly a "Book of the single European rules" that represent
regulation for all financial institutions in the Single European Market. Each Authority, in its
area, will be responsible for supervision of cross-border groups; activity of Authorities
national, to evaluate the consistency of their work with the new rules. Each will also
tasks for arbitration in case of disputes between national Authorities and oversee the activities of the
Rating agencies of reference.
The architecture of the European Supervisory Authority was inspired by the De Larosière report (February 2009)
which starts from a diagnosis merciless on the level of financial integration and coordination of
Supervisory Authorities and the Lamfalussy Report (1999) which established the European supervisory committees
now transformed into micro Authorities.
The critical point of the whole construction lies in the nature of the three micro-prudential Authorities.
They, in fact, represent a system that overlaps the national Authorities, not a system
supranational replacement as the European System of Central Banks in which the ECB has
expropriated the national central banks of their autonomy and their functions transforming
in its operational network. The strength of national interests did prevail a model of
coordination of national powers, which remain intact, the architecture of supervision
centralized and integrated that Europe would need. The powers of supervision and management of
crisis remain, in fact, the prerogatives of the national Authorities. Such an approach is
extremely problematic and cumbersome in reference to the supervision of multinational banks
European and, a fortiori, to the management of them, any crisis. It remains, in essence,
unchanged asymmetry that has contributed to the crisis: banks and multinational
National Authorities. The manual Cencelli, which ensured the maintenance of substantial
status quo, is also evident from the geographic location of the three Authorities: London, Frankfurt, Paris. The governance of each Authority is complex and problematic, distributed between one
Stearing Committee, a Management Board and a Board of Supervisors, the decisive body
consisting of 32 members of which 27 are representatives of the national authorities of the Member
States with a high power conditioning.
For these reasons it is particularly relevant the formulation of common rules that the ESFS will
formulate and to which the national authorities must follow in carrying out their role.
"Basel 3" completed the investigation phase and an advisory is, by now, entered the deliberative path.
The new legislation provides for 1) the strengthening of the capital adequacy of companies
credit, by increasing the "core" component of regulatory capital, the
improvement in asset quality, with a preference for ordinary shares and retained earnings
and correlative limits hybrid instruments and the supplementary capital; 2) the introduction of
"Leverage ratio", ie a maximum ratio between capital and active even in good times
the economic cycle; 3) the adoption of measures to counter pro-cyclicality, by providing a "buffer" of
capital in cyclical upswings and provisions related to the expected losses of an entire
economic cycle; 4) the reduction of liquidity risk through 4.1) "bearing" of liquid assets
able to cope even in very severe conditions of stress, to cash outflows expected in a
time horizon of thirty days and 4.2) principals to structural balance between the maturities
of assets and liabilities within the timeframe of one year.
"Basel 3" comes, of course, on the failure of "Basel 2" and the empirical verification of its
pro-cyclical nature, that is suited to exaggerate the recessionary impulses of financial crises
restricting credit to businesses. Discovery, indeed, as a function of time and tautological
credit structurally designed and regulated to the tail of the dynamics of the market can not, by
definition, exercise any counter-cyclical effect. "Basel 2" was, in fact, the technical translation
an omnivorous vision of finance and economics based on the fetish of the present, the "here and
now, "the maximalism of" all at once ", on the valuation of each asset at market prices, of
accounting techniques that, through off-balance sheet vehicles, then concealed from Enron in losses
investors on rating agencies paid by the assessed, ultimately, on a bulimia
primordial of this devouring every possible condition for the future.
For these reasons, "Basel 3" must enroll in a new paradigm of finance and economics
which we have briefly traced the lines: Authorities and rules for global finance,
financial stability, transformation of leverage leverage in developing socially and
environmentally sustainable economies and communities.
According to the prevailing "Basel 3" will facilitate the immediate destination of the
useful to strengthen the capital rather than to dividend, bonus or sotck options and, when fully implemented,
must provide flexibility in capital charges, increasing expansion phases, reduced in
downturns to avoid the "credit crunch" and carry out an effective anti-cyclical stabilizing
credit flows all'economia.Questa setting, seemingly effective, suffers from an undifferentiated approach, ie
of the claim to apply to all banks and financial intermediaries, both for those in Europe or
Anglo-Saxon, with a high center of gravity finance, nationalized or recapitalized with public funds
and with a value of leverage to 50, both for brokers who do not have resorted to
public support, with a high center of gravity monetary and financial leverage below 20 as
happens in Italy.
In the composition of the European banking system to 2009, loans to the economy are the
38% and financial assets 47%. In the Italian banking system loans to the economy are the 63%
and financial assets 18%.
A bancocentrico financial system, such as the Italian (and Canadian), with intermediaries rooted
in the economies of reference and a lower financial component, can not be assimilated to
financial systems centered on the exchanges and with a high content of finance. In a situation already
criticism of the credit crunch, minimum spreads, interest margins in the fall, substandard, doubtful,
credit losses in high growth, shrinking profits, undifferentiated application of the "Basel
3 ", as seems to prefigure, produce banking systems more integrated into the economies of
reference an inevitable effect of radical reduction of assets and credit rationing
in response, the denominator, all'impossibiltà to increase the equity in the numerator.
If the "Basel 3" does not want to play the perversions of pro-cyclical "Basel 2" increasing the capacity
credit, which is essential to combat the crisis and reverse the trend, will modulate the relationship
between equity and assets and liquidity ratios on the real risk spreads (credit,
financial, systemic) and financial leverage and the need to counter the recessionary trend
not won.
The differentiation allocations to equity and cash reserves, together with the
measures of fiscal policy, covered by sections 1-6 of the previous chapter (page 5), complete
the framework of the proposed intervention with tax regulations indirect effects.
The weakness of direct regulation (Dodd-Frank Act), its absence in Europe and limitations
endogenous to the indirect regulation ("Basel 3") call into question the ability to address the
fiscal policy as a decisive variable.
The story of the slow, complex, difficult and turbulent financial market regulation did
emergence of a group of disruptive issues.
The first concerns the free zone which continues to enjoy the "shadow banking system" ("Shadow
Banking System "), Investment Banking, Private Equity, Hedge Fund, the principal, though not
exclusive, driver of the crisis.
At his initiative for dealing with virulent speculative pressures on sovereign debt in Europe more
high. In 2008 and until the beginning of 2009, investors' attention was focused on
corporate bonds issued in large quantities. The prices of the Credit Default Swaps (C.D.S.) that
had those bonds as the underlying went up with the increase in the risk of insolvency of quegliemittenti. The risk of sovereign countries with high deficits and debt was outside the radar screens
financial markets and some large banks and hedge funds did stock up on CDS on debt
sovereigns most exposed to very low prices. The explosion of sovereign risk of Greece, Portugal,
Ireland,
Spain (Moody's downgraded the beginning of March the Spanish sovereign debt rekindling
expectations of default on sovereign debt risk) resulted in the exponential growth of the prices of
C.D.S. that provide them. It 'true, as stated in the liberal clichés, that CDS are the
thermometer deficit and public debt are-fever. It is, however, a thermometer singular
because the doctor who owns it is most interested in the explosion of fever and work
actively to ensure that the disease is unleashed! The pressure exerted by the system recently
German banking heavily exposed in speculative logic greek debt, for a
anticipated restructuring of the debt of Athens shows throughout the instrumentality of some
derivative instruments such as CDSs.
The Bank for International Settlements has calculated, in January 2011, trading on the market
global foreign exchange (indirect index of total trading) to 4 trillion dollars a day (8% of GDP
annual worldwide).
The rescue of the banking and financial system in the absence of international regulation
systemic and comprehensive enabled the predatory finance to return to "business as usual".
The market for derivatives over the counter (OTC) in June 2010 (source BIS) is estimated
to a notional value of $ 600,000 bn almost 500000mld euros, of which 82% consists of
derivatives on interest rates (367,541 billion. than $ swap), 11% of foreign exchange derivatives, and the rest of
credit derivatives, commodity and equity linked. The following table, relative to the first 18 groups
European banking and financial highlights systemic risk, which is still unresolved, the financial markets.