NYU Stern: April 2010 Archives

When Congress returns next week, financial reform will finally headline the agenda.

Taxpayers have been laden with huge debt burdens to rescue the banks and protect the soundness of the financial system. Wall Street banks have lately enjoyed improved earnings and big share gains. But the causes of the credit meltdown have still not been addressed.

The bill from Senate Banking Committee Chairman Christopher Dodd, D-Conn., offers more than 1,300 pages worth of fixes. But length and complexity do not ensure effectiveness.

Derivatives, bank capital and leverage rules, and asset securitization were three root causes of the crisis. Several experts, including Matthew Richardson, professor of finance at the NYU Stern School of Business, question whether the Dodd bill would deal with these issues effectively enough to avert another costly crisis.

Read the full article from Investor's Business Daily with Richardson's comments.

The Fallacy of Bank Diversification

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by Viral Acharya & Matthew Richardson

In a recent Wall Street Journal article, John Varley, Barclays Chief Executive, was quoted as saying: "We see big banks as diversifiers, not risk aggregators." His comments are part of a chorus of Bank CEOs now questioning various reforms that are aimed at large, complex banks.

He is plain wrong and regulators should be wary of such arguments.

About RegulatingWallStreet.com

The Dodd-Frank Act, signed into law in July 2010, represented the most significant and controversial overhaul of the U.S. financial regulatory system since the Great Depression. Forty NYU Stern faculty, including editors Viral V. Acharya, Thomas F. Cooley, Matthew P. Richardson, and Ingo Walter, provide a definitive analysis of the Act, expose key flaws and propose solutions to inform the rules’ adoption by regulators, in a new book, Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance (Wiley, November 2010).

About Restoring Financial Stability

Previously, many of these faculty developed 18 independent policy papers offering market-focused solutions to the financial crisis, which were published in a book, Restoring Financial Stability: How to Repair a Failed System (Wiley, March 2009).

About the Authors