More to the point, if we are concerned with the banks, their risks, and the leverage they assume, it must be holistically examined as part of their business operations – residential mortgages, commercial lending, HELOC’s, securitization, insurance, and so on.  Addressing the macro issues and concerns without fixing the underlying micro models and processes of operation is akin to painting a car that doesn’t run.

Each of the aforementioned areas is of great concern for US and UK taxpayers.  With cross-border exchanges and operations the norm for the last two decades, the use of “paper” walls of regulation will do little to address the fundamental causes of the market’s dysfunctional behaviors. 

Perhaps it is time to “think big, but start small,” while iterating our markets to success?  After all, we have debated changes since 2008.  What really has been done outside of throwing money at the problems? 

The fundamental point missed here is resides not around hand-outs, but putting Americans back to work.  Yes, there will still be historic foreclosure and default rates.  The homeowner hangover must be worked through.  Yet throwing more printed government money at a solution that took a decade to make is also irresponsible.

Of the 55 million mortgages in the USA, the approximately 11 million in stress or foreclosure is cause for great concern.  However, what about those households who have been responsible and paid their bills even though their homes are underwater?  The disadvantaged need to be helped without any doubt, but more handouts to stimulate a market that is need of drastic rework is not a good answer either. 

Too many are still profiting from the suffering of others without any material changes being made to the supply chain of mortgage operations (i.e., origination, servicing, and securitization).

Jobs, reworking of the GSE’s (permanent rework and breakup) is good set of goals that cannot be glossed over by politicians or industry lobbyist.  Regulation can only prevent – not solve – an existing crisis.  If jobs and industries cannot be stimulated, then does that mean the debt = GDP levels of today should now be increased 20% or 35%? 

I understand the concern and empathize – but more programs and easy money is not the issue.  After all if we take away the pillars of capitalism and risks, then what is left to allow market forces (now global) to behave as they should?

Moreover, regulation cannot be created in a vacuum of based upon a model of what is desired.  Unemployment, trading deficits, national deficits, education of populace, exchange rates, nationalistic policies, and many other factors all are variables in the debate.  As Mr. Kahn states, the complexity of herding each domestic leadership group (often many within each country), creates permutations and conflicts of interest, which I’m sorry to say, will unlikely ever be overcome.

It is likely that we will get some general agreements that provide statement of direction or a loosely coupled, non-binding framework.  However, for domestic politicians to state to their electorates that they are ceding financial regulatory governance control to an international body seems counter to their goals of being re-elected. 

More than likely, it will be up to each nation to craft rules and regulations that meet the “spirit” of the regulation and its overarching governance principles.  For many of us, that would be a welcome change from endless debate or worse, doing nothing.