Volcker Talks Reform
When you want to discuss financial regulation, a good panel will include either of the Volcker Rule's two namesakes: former Fed chair Paul Volcker or rapper Ja Rule. Jones Day went with the former.
More than 200 guests came to 51 Louisiana Ave this week to hear the high-profile panel discuss regulating financial institutions: Paul Volcker, Goldman Sachs Group managing director and former Federal Reserve Bank of NY president Gerald Corrigan, former CFTC chairman Gary Gensler, MIT Sloan School of Management prof and former IMF chief economist Simon Johnson, Citigroup chairman Michael O'Neill, and former SEC chairman Arthur Levitt. Paul founded the Volcker Alliance, which co-sponsored the event, last year to advocate for more effective government.
Panelists brought varied perspectives on restructuring: everything from how much of the existing regulatory system to scrap to how many agencies should regulate banks. Paul (snapped with Group of Thirty founder Geoffrey Bell and Mercantil Servicios Financieros president Gustavo Vollmer) would like to get consensus on the most crucial issues and constructive improvements, then test the waters in Congress and the Administration on the possibility of reform legislation. If that doesn't work, he says, they may end up issuing a report, which he would consider a defeat. Since the Hoover Commission in '47, he says, there have been more than 20 efforts to reorganize the federal financial system—"We are here as part of an effort to prove the impossible may be possible."
Arthur says the Federal Reserve has served more as the "bankers' protective association" than an effective regulatory body. Many regulators' jobs are "Wizard of Oz" jobs, he added, including the one he had. The poisonous political environment has leached into the agencies, and he feels the answer isn't even restructuring: it's the persuasiveness, wisdom, and willingness of agency heads to put their jobs on the line. (Then he added that he might be denied dessert for his statements.)
Group of Thirty chairman and former European Central Bank president Jean-Claude Trichet (right, with Fahey Banking Company president Carl Hughes), talked about the US banking system from an international perspective. America is too inward-looking, he says, and needs to be more of a leader. (We'll discuss that in a moment, but first: does the VAT make us look fat?)
Former FDIC chair Sheila Bair (current chair Martin Gruenberg was there, too, though not in this photo), caught up with Citigroup senior advisor Bill Rhodes and chair Michael O'Neill. Michael's take on regulatory reform was that we need a single banking regulator for both banks and bank holding companies. This is so important, he says, that its implementation shouldn't wait for full regulatory reform.
Goldman Sachs Group managing director Gerald Corrigan, right, with former CFTC chair Gary Gensler, says the roots of the financial crisis can be traced to the 1980s: a pattern of deregulation, increasing public and private debt, a technological explosion, and asset price bubbles. Gary says we shouldn't subordinate consumer protections and market efficiency and regulation to prudential control—so two or three agencies should regulate banks.
We spotted the co-chairs of Jones Day's banking & finance practice at left, center, and right: Ed Nalbantian, Bob Graves, and Brett Barragate; in between is Jones Day government regulation head Noel Francisco and Delaware Trust Company director James Lawler.
First director of Treasury's Office of Financial Research and former Morgan Stanley co-head of global economics Richard Berner, GWU Business School prof and former Under Secretary for Economic Affairs and SEC commissioner Cynthia Glassman, Davis Polk partner and former SEC commissioner Annette Nazareth, and TIAA-CREF CEO Roger Ferguson. Annette also worked with Arthur Levitt as his senior counsel at the SEC and as director of what's now the Division of Trading and Markets.
Taking in the view from Jones Day's terrace were Georgia State University prof Elizabeth Brown and Joint Committee on Taxation economist John Navratil. Despite the serious discussions, guests weren't going hungry: they enjoyed cavatelli carbonara, ravioli with fresh mussels, porcini risotto, cheddar BLTs, and traditional Maine lobster rolls.