« Getting it right on foreign aid | Main | More from Subramanian on foreign aid »

August 29, 2007

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c891753ef00e54ed3b9b68833

Listed below are links to weblogs that reference Exporting hazardous products:

» mobile phone with free gift from mobile phone with free gift
Don't buy your next mobile phone until you know about the free gidts avaiable from a trusted name like Tesco [Read More]

Comments

robertdfeinman

Or you can use your economic and military strength to force others into lopsided deals (at least until they gain enough power to resist).

The US is a bully and only changes its behavior when forced to. Look at the behavior after the WTO talks stalled. The US just went around the organization and made bilateral agreements. This allowed them to divide and conquer.

Per Kurowski

The misled investors, who should blame themselves too, need not to come to the United States to express their complaints since for that they could just to turn to their own central bank and bank regulators who all, hand in hand with the IMF, played a role as fervent collaborationist with The Bank for International Settlements (BIS) in promoting that crazy idea of empowering the credit rating agencies through the standardized approach for capital requirements set out in BASEL I.

I have been writing on this issue since 1997 and as I happened to become an Executive Director at the World Bank I got invited to make some comments "Risk Management Workshop for Regulators: Assessing, Managing and Supervising Financial Risk" arranged by the World Bank in Washington during the week 27 April – 2 May 2003. This is what I told them about the credit rating agencies.

“I simply cannot understand how a world that preaches the value of the invisible hand of millions of market agents can then go out and delegate so much regulatory power to a limited number of human and very fallible credit-rating agencies. This sure must be setting us up for the mother of all systemic errors.”

Of course, I never got invited to speak to them again.

Kenji

It's baffling to me that so-called sophisticated investors have continued to rely on credit-rating agencies' ratings, after the Enron debacle. Maybe, they need to feel more pain before they realize that they should do their own due diligence work.

Justin Rietz

Dani -

Why would regulation have controlled the situation any better? If we assume the credit agencies were acting in good faith, then is there any reason to assume government regulators would have recognized issues sooner? If the credit agencies were negligent, they, along with conspiring financial institutions, will face massive lawsuits (and if they were willing to risk massive lawsuits, I am guessing they would have taken the risk to find a way around regulations).

Per Kurowski - Would you provide a little more detail as to what regulatory power was given to credit agencies?

From a slightly different perspective, the U.S. legal system has at its foundation the belief in innocence until proven guilty. Regulation, on the other hand, assumes "you will do something bad, so I am going to take preventative actions to stop it".

Per Kurowski

Re Kenji: “It's baffling to me that so-called sophisticated investors have continued to rely on credit-rating agencies' ratings, after the Enron debacle”

Do not believe for a second that the credit rating agencies have grown into the big monsters they are just by doing there job right.

Re Justin Rietz: “Would you provide a little more detail as to what regulatory power was given to credit agencies?”

It is all over the place but let us say that the core of it all lies in their role for calculating the Minimum Capital Requirements according to the regulators in Basel. It is a bit lengthy, sorry, but the following document would give you the most on that http://www.bis.org/publ/bcbs118b.pdf

Re Justin Rietz: “the U.S. legal system has at its foundation the belief in innocence until proven guilty”

Since the credit rating agencies say that they are only giving opinions which are protected under the First Amendment, in that case you might have to go after those who forced you to listen to these mere opinion-makers, namely the bank regulators. You see, the plot thickens.

hari

Dani -

I've commented on this subject when you first tried to discuss its ramifications:

I've an uncanny belief that there 's a lot more greed and lack of remorse in US "capitalist morality" when dealing with not only globalization issues (which impinge on national sovereignty) but its own lack of accountability in fianancial markets.

The middle-men have been the swindlers in subprime scandal which Congress should fully investigate and expose to (housing) public.

What Rogoff is referring to is "laissez-faire" capitalism - without any constraints. It'll inevitably come back to foreclose the ruin of the system itself, if care is not taken to avoid the manipulators of the financial derivatives market.

Per Kurowski

Re Hari: “The middle-men have been the swindlers in subprime scandal”

It is hard though to identify the middle-men as they could be so many and also after a dirty-war you really do not want to go after the soldiers but you would try to look more towards the generals.

Having said that and had I been investing through a hedge fund in some type of sophisticated derivatives which current values were calculated using a financial model of theirs; I would at least be pursuing someone to get back all the perhaps faulty commissions I was made to pay on what turned out to be purely theoretical profits.

Let us not forget that it is not so much that the market turned against them as the suddenly discovery of some fundamental flaws.

johnchx

My sense is that the purpose of credit ratings "agencies" is to defeat claims of mens rea, making criminal prosecutions impossible. If a money manager can say, "I relied upon S&P and Moodys," it's difficult to prove that he knew perfectly well that the securities in question were riskier than advertised and that their sale constituted actual fraud.

Per Kurowski

Re Johnchx “My sense is that the purpose of credit ratings "agencies"…”

Absolutely not! If all this had anything with to do with a bad intention on purpose it would be much less dangerous than what it is and it would never ever have the intrinsic power of turning itself into a pure systemic risk.

The truly dangerous part of this is that the whole system was put in place just because the regulators thought bona-fide that they thereby could tame the beast of risks. Now it happens to be that the beast is untamable… just went into hiding for a while, and as the regulators should have known had they not been too arrogant.

op

dani
displays a devilish
way with analogy
and
not for the first time

conundrum

The analogy is very well chosen but the policy recommendation is the same: There is no need for outside intervention. American importers have plenty of opportunities to inspect their merchandise and will do so when consumer want them do. Similarly, Germany's bank regulator should probably concontrate on the incentives of state-owned 'Landesbanken' to gamble with taxpayer's money before trying to regulate the US mortgage market.

sbo

@ conundrum

I believe both are somewhat right - Dani and you (or foreign and US regulatory authorities):

Ofcourse, every state has its right to govern things as he likes - China as well as the US, Iran as well as Israel. And every foreigner getting in contact with that state should inform him/herself about and adopt to the rules applicable. And might risk to run into trouble due to cultural differences if he/she doesn't invest enough ressources in double-checking.

But if there where more international supervision and regulation of financial markets, this would significantly reduce costs for this kind of research, removing or lowering barriers to entry and improving competition. A good example are the efforts of the EU which usually serve well (contrary to common believe it's usually the national policies of the member states that prevent optimal implementation of EU plans).

The time being, there are two conclusions:
a) foreign national regulators should focus on controlling there local banks and impose efficient control on their offshore SIVs.
b) a deeper integration and cooperation of international finance regulators could save significant costs but from an US point of view does not seem neccessary because the USD still attracts sufficient foreign investment without providing better protection for investors.

jp

Dani makes an interesting analogy between the export of goods and the export of financial instruments. If the quality of one should be internationally regulated, than so should the other.

The US exports stocks too. And stocks are incredibly complex to analyze... reams of financial statements, complex industry dynamics, as well as uncertainty about the future. Does Dani think stock analysis should be regulated too by an international governing body, since these are risky exports? Or are they not risky enough? How will he define this line?

rado watches

Why is everyone just montblanc watches willing to accept power cuts? Don't you think that patek philippe watches having continious power is your right? If people aren't going to demand rado watches 24X7 power, don't expect anything zenith watches to change. The government needs to look at other sources parmigiani watches of power generation. The only solution is more power panerai watches production. Nothing less.
http://www.watchvisa.com/montblanc-watches.html
http://www.watchvisa.com/patek_philippe-watches.html
http://www.watchvisa.com/rado-watches.html

rolex watches

People usually say :"Seeing is believing." http://www.tt88times.com
Each attempt has a corresponding gain, in part or obvious, or vague. At least we have the kind of satisfaction After I bought this watch ,in a sense,it means a great deal to me. http://www.fashionhairfu.com

jordan shoes

People usually say :"Seeing is believing." http://fansshirt.com Each attempt has a orresponding gain, in part or obvious, or vague. At least we have the kind of satisfaction After I bought this watch ,in a sense,it means a great deal to me. http://boon-shoes.com

ugg classic knit

People usually say :"Seeing is believing." http://jordanmass.com Each attempt has a orresponding gain, in part or obvious, or vague. At least we have the kind of satisfaction After I bought nfl jersey ,in a sense,it means a great deal to me. http://www.fansshirt.com

nfl jersey

People usually say :"Seeing is believing." http://jordanmass.com Each attempt has a orresponding gain, in part or obvious, or vague. At least we have the kind of satisfaction After I bought this watch ,in a sense,it means a great deal to me. http://boon-shoes.com

cheap jordans

Very interesting issue that after a very successful. Nicely written article good work ! Thanks for the great piece of sharing.

jordan shoes

It's good to see this information in your post, i was looking the same but there was not any proper resource, than now i have the link which i was looking for my research.

nike

We have been banned and have a considerable amount of money owed to us.
http://www.anfworld.com/abercrombie-and-fitch-jeans.html
http://www.anfworld.com/ruehl-no-925.html

Account Deleted

raf

Thanks so much.

Account Deleted

The US exports stocks too. And stocks are incredibly complex to analyze... reams of financial statements, complex industry dynamics, as well as uncertainty about the future. Does Dani think stock analysis should be regulated too by an international governing body, since these are risky exports? Or are they not risky enough? How will he define this line? Wholesale Beads store

Mbtmbtshoes

Coach bags "Russia's voices: why is analyzed by kill osama bin laden, and not be taken alive, said that the United States worried he would say a lot of interesting things,

Account Deleted

Raf
raf

Thanks for this ...

Account Deleted

Many places and centers offer business and trade promotions to both buyers and supplier.What about the differences in skill intensities across industries? The job losses in the relatively unskilled-labor intensive battery industry should have little effect on the relatively skilled-labor intensive machinery
sexshop
sexyshop
sexshop online

Account Deleted

This is good site to spent time on .I just stumbled upon your informative blog and wanted to say that I have really enjoyed reading your very well written blog posts. I will be your frequent visitor, that's for sure.

organic seo service

The comments to this entry are closed.