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Financial Reform – Senator Dodd’s Bill Is All Gums And No Teeth

by Chuck on March 15, 2010 · 0 Comments

Earlier today Senator Chris Dodd (D-CT) held a press conference where he discussed the main points of his financial (non) reform bill. As expected the bill appears to be nothing more than more committees, more regulators to monitor other departments, and more rhetoric about Too Big To Fail.

Mr. Dodd is really trying to appease the average hard working Americans in a big way. One of his opening statements is tailored towards the main stream population.

Why Change Is Needed: The economic crisis was driven by an across-the-board failure to protect consumers. When no one office has consumer protections as its top priority, consumer protections don’t get the attention they need. The result has been unfair and deceptive practices being allowed to spread unchallenged, nearly bringing down the entire financial system.

Mr. Dodd claims that the financial crisis was driven by a failure to protect consumers. While consumers are always being screwed by large corporations, it is hardly the cause of the crisis. The financial crisis was conceived when Glass-Steagall was essentially abolished in 1999. This opened the door for Wall Street to dabble in all kinds of exotic and dangerous securities, mainly mortgage backed securities. After Glass-Steagall was brought down then came the removal of leverage limits.

Because Glass-Steagall was no longer in effect, it allowed everybody to play with the securities which we now know turned out to be improperly rated, misrepresented, and sold by Wall Street as if they were as solid as a gold bar. The only part that involved the consumer was when Wall Street needed more and more mortgages to bundle up and sell. That led to the ‘no income, no problem’ loans that banks were handing out left and right.

The consumer was nothing but a source of money to continue fueling the demand for more mortgage backed securities. The seeds of the financial crisis had already been planted way before the consumers were being swindled into believing they could get a mortgage for next to nothing. That was just icing on the cake.

The financial crisis is the child of deregulation and greed. Wall Street knew they could get away with just about anything, and they did. They alone created the crisis, not because the consumer was not being protected. How many of your neighbors bought mortgage backed securities? Probably not a single one I would bet. The destructive securities were traded in huge tranches that were moved throughout the world to large hedge funds, pension funds, sovereign wealth funds, and of course traded with other large firms. In the end it became a game of ‘hot potato’, the last one holding it lost the game.

Mr. Dodd’s opening statement just goes to show who he is trying to appease with his financial (non) reform bill. It is to make the public feel better. As far as having any significant impact on Wall Street’s normal way of business, the bill offers little substance. In some aspects the bill may actually create additional loopholes that can be exploited, and give Wall Street a loophole, no matter how tiny it is, they will try to stuff a truck through it.

The full text of the financial (non) reform bill summary:

Senator Chris Dodd – Statement on Financial Regulation

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Sunday Musings – The Economy Is Fine

by Chuck on November 15, 2009 · 4 Comments

The clip shown below from last nights opening for Saturday Night Live pretty much sums up how it is we are led to believe all is well.

In the clip the actor portraying VP Joe Biden waves his hand and says “The stimulus is working“. Unless you are a fan of Star Wars you would probably have missed the meaning of his waving of the hand as he spoke.

The tale of the Jedi Knights from Star Wars is that they can induce a thought by employing a mind control technique which was always highlighted by a wave of the hand in front of those with weaker minds.

The point I am emphasizing here is that we have always known that the Government will tell us one thing while reality is in many cases something completely different. But the level of putting on a happy face and hand waving by the Government has ramped up to what must be an all time high of ‘inducing  good karma”.

There are so  many examples of this technique from Washington that I would not even know where to begin. During this current economic crisis that the nation still finds itself embroiled in we only have to look back to the past few years with then Treasury Secretary Hank Paulson.  Mr. Paulson  spoke many times before the economy slid down the mountain that the fundamentals of the economy were sound. That sentiment was echoed by many others, Democrat and Republican were guilty of spreading good cheer when everyone else in the private media (bloggers) were saying the opposite. In the end we found out which was telling the truth.

On Friday we received the University of Michigan consumer confidence data and it dropped lower yet again. Consumer confidence is a ‘forward’ looking indicator as it conveys the attitude of the people who will be spending the money.  And just where will that money come from to fuel organic growth with real unemployment nearing 18% (U-6 measurement), credit card companies jacking up interest rates to 30% and even cutting off millions of card holders by reducing their spending limit or outright canceling their accounts. Heck, you don’t even to have to have bad credit yourself anymore, but if you even shop at stores that is known to have a higher average of shoppers with bad credit then guess what… you are labeled one of them as well even if you have good credit history.

I hope one day more and more people will wake up and realize they keep getting sold a bag of lies and crap by those who supposedly represent us. Unfortunately when people do speak up the mainstream media (and Government) paints those individuals as radicals. The last time I checked the 1st amendment to the Constitution still allowed free speech. Even though the 1st amendment is still there the people are slowly giving up that freedom by allowing themselves to be taunted in the media and being spoken down to by the Government.

It was said centuries ago that when the people fear the Government, there is tyranny; when the Government fears the people there is liberty (Thomas Jefferson).

Today the situation goes one step further by adding into the mix the thousands of lobbyists who speak for the corporations and not the people. If you are rich and powerful you have a direct line to the White House. If you are a lobbyist you have elected officials on speed dial, if you are blue collar middle class you have no one that will listen to you, and if you are the poor you have no voice whatsoever.

Today I learned that some talking points echoed by Congress during the health care reform bill debate were actually provided by lobbyists that were hired by Genentech (ref NY Times).

The men and woman in Washington are supposed to represent YOU. But just try to call your local Representative and schedule an appointment to meet with him or her. The majority of the time their staff will just tell you they don’t have the time and request that you send a letter instead (I know this, I have tried it many times). If you are a representative of a major corporation and you contact the Representative you move to the head of the line.

So the next time your elected official waves his hand in front of your face telling you that ‘all is well’ surprise him by saying “your Jedi mind tricks won’t work with me any more”. And tell them to represent you for a change.

Lookup information on how to reach your representative —>  CLICK HERE

Lookup information on how to reach your State Senator  —->  CLICK HERE

Want to learn who is paying who in Washington  —–> Open Secrets.org

11-15-2009 3-58-16 PMJust for example, let us take Senator Chris Dodd (D- CT). Last week he released a draft bill that would provide regulation to the financial industry. But will his draft bill have any meat to it? Of course not, his biggest contributors are the financial firms themselves.

Chris Dodd top contributors 2003-2008 shown here.

The only way our elected officials will ever listen to us is if we outnumber the power of their pimps; the lobbyists.

How sad it is that people in this Country will take the time to send a message to American Idol to cast a vote, but won’t take the time to send a message to those who represent them in Washington.

Is this the United States of America or is it the United Corporations of America?

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More on this topic (What's this?)
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Read more on Election 2008 at Wikinvest

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Financial Reform – President Obama’s Speech

by Chuck on June 17, 2009 · 1 Comment

In case you missed President Obama’s speech today when he announced his plans for new financial regulations and reform then don’t fret, you can read it all right here:

Since taking office, my administration has mounted an extraordinary response to an historic economic crisis. But even as we take decisive action to repair the damage to our economy, we are working hard to build a new foundation for sustained and lasting growth. This will not be easy. We know that this recession is not the result of one failure, but many. And many of the toughest challenges we face are the product of a cascade of mistakes and missed opportunities which took place over the course of decades. That is why, as part of this new foundation, we are seeking to build an energy economy that creates new jobs and new businesses to free us from our dependence on foreign oil; to foster an education system that instills in each generation the capacity to turn ideas into innovations, and innovations into industries; and, as I discussed on Monday at the American Medical Association, to reform our health care system so that we can remain healthy and competitive. This new foundation also requires strong, vibrant financial markets, operating under transparent, fairly-administered rules of the road that protect America’s consumers and our economy from the devastating breakdown we’ve witnessed in recent years. It is an indisputable fact that one of the most significant contributors to our economic downturn was an unraveling of major financial institutions and the lack of adequate regulatory structures to prevent abuse and excess. A culture of irresponsibility took root from Wall Street to Washington to Main Street. And a regulatory regime basically crafted in the wake of a 20th century economic crisis – the Great Depression – was overwhelmed by the speed, scope, and sophistication of a 21st century global economy. In recent years, financial innovators, seeking an edge in the marketplace, produced a variety of new and complex financial instruments. These products, such as asset backed securities, were designed to spread risk but ended up concentrating it. Loans were sold to banks, banks packaged these loans into securities, and investors bought these securities often with little insight into the risks to which they were exposed. It was easy money. But these schemes were built on a pile of sand. And as the appetite for these products grew, lenders lowered standards to attract new borrowers. Many Americans bought homes and borrowed money without being adequately informed of the terms, and often without accepting their responsibilities. Meanwhile, excessive executive compensation – unmoored from long-term performance or even reality – rewarded recklessness rather than responsibility. This wasn’t just a failure of individuals. This was a failure of the entire system. The actions of many firms escaped scrutiny. In some cases, the dealings of these institutions were so complex and opaque that few inside or outside these companies understood what was happening. Where there were gaps in the rules, regulators lacked the authority to take action. Where there were overlaps, regulators lacked accountability for inaction. An absence of oversight engendered systematic, and systemic, abuse. Instead of reducing risk, the markets actually magnified risks being taken by ordinary families and large firms alike. There was far too much debt and not nearly enough capital in the system. And a growing economy bred complacency. We all know the result: the bursting of a debt-based bubble; the failure of several of the world’s largest financial institutions; the sudden decline in available credit; the deterioration of the economy; the unprecedented intervention of the federal government to stabilize the financial markets and prevent a wider collapse; and most importantly, the terrible pain in the lives of ordinary Americans. There are retirees who have lost much of their life savings, families devastated by job losses, small businesses forced to shut their doors. Millions of Americans who have worked hard and behaved responsibly have seen their life dreams eroded by the irresponsibility of others and the failure of their government to provide adequate oversight. Our entire economy has been undermined by that failure. The question is, what do we do now? We did not choose how this crisis began. But we do have a choice in the legacy this crisis leaves behind. So today, my administration is proposing a sweeping overhaul of the financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression. These proposals reflect intensive consultation with leaders in Congress, including those here today: leaders like Chairmen Dodd and Frank, who along with Senator Shelby and Representative Bachus met with me earlier this year to jumpstart the discussion of reform. They also draw on conversations with regulators, including those I met with this morning; consumer advocates; business leaders; academic experts; and the broader public. In these efforts, we seek a careful balance. I have always been a strong believer in the power of the free market. It has been and will remain the engine of America’s progress – the source of prosperity unrivaled in history. I believe that jobs are best created not by government, but by businesses and entrepreneurs who are willing to take a risk on a good idea. I believe that our role is not to disparage wealth, but to expand its reach; not to stifle the market, but to strengthen its ability to unleash the creativity and innovation that still make this nation the envy of the world. That’s our goal. To restore markets in which we reward hard work and responsibility, not recklessness and greed – in which honest, vigorous competition in the system is prized, and those who game the system are thwarted. With the reforms we are proposing today, we seek to put in place rules that will allow our markets to promote innovation while discouraging abuse. We seek to create a framework in which markets can function freely and fairly, without the fragility in which normal business cycles bring the risk of financial collapse; a system that works for businesses and consumers. There are those who will say we do not go far enough, that we should have scrapped the system altogether and started again. I think that would be a mistake. Instead, we have crafted reforms to pinpoint the structural weaknesses that allowed for this crisis and to make sure that these problems are dealt with so as to prevent crises in the future. There are also those who will say we are going too far. But the events of the past few years offer ample testimony for the need to make significant changes. The absence of a working regulatory regime over many parts of the financial system – and over the system as a whole – led us to near catastrophe. We do not want to stifle innovation. But I’m convinced that by setting out clear rules of the road and ensuring transparency and fair dealings, we will actually promote a more vibrant market. This principle is at the heart of the changes we are proposing. First, we are proposing a set of reforms to require regulators to look not only at the safety and soundness of individual institutions, but also – for the first time – at the stability of the system as a whole. One of the reasons this crisis could take place is that while many agencies and regulators were responsible for overseeing individual financial firms and their subsidiaries, no one was responsible for protecting the whole system from the kinds of risks that tied these firms to one another. Regulators were charged with seeing the trees, not the forest. Even then, some firms that posed a so-called “systemic risk” were not regulated as strongly as others; they behaved like banks but chose to be regulated as insurance companies, or investment firms, or other entities under less scrutiny. As a result, the failure of one large firm threatened the viability of many others. The effect multiplied. There was no system in place that was prepared for this kind of outcome. And more importantly, no one has been charged with preventing it. We were facing one of the largest financial crises in history – and those responsible for oversight were mostly caught off-guard and without the authority needed to address the problem. It’s time for that to change. I am proposing that the Federal Reserve be granted new authority and accountability – for regulating bank holding companies and other large firms that pose a risk to the entire economy in the event of failure. We will also raise the standards to which these kinds of firms are held. If you can pose a great risk, that means you have a great responsibility. We will require these firms to meet stronger capital and liquidity requirements so that they are more resilient and less likely to fail. And even as we place the authority to regulate these large firms in the hands of the Federal Reserve – so that lines of responsibility and accountability are clear – we will also create an oversight council to bring together regulators from across markets to coordinate and share information; to identify gaps in regulation; and to tackle issues that don’t fit neatly in an organizational chart. We’re going to bring everyone together to take a broader view – and a longer view – to solve problems in oversight before they can become crises. As part of this effort, we are proposing the creation of what is called “resolution authority” for large and interconnected financial firms so that we are not only putting in place safeguards to prevent the failure of these firms, but also a set of orderly procedures that will allow us to protect the economy if such a firm does in fact go under. Think about this: if a bank fails, we have a process through the FDIC that protects depositors and maintains confidence in the banking system. This process was created during Great Depression when the failure of one bank led to runs on other banks, which in turn threatened wider turmoil. And it works. Yet we do not have any effective system in place to contain the failure of an AIG and the largest and most interconnected financial firms in our country. That is why, when this crisis began, crucial decisions about what would happen to some of the world’s biggest companies – companies employing tens of thousands of people and holding trillions of dollars in assets – took place in emergency meetings in the middle of the night. And that is why we’ve had to rely on taxpayer dollars. We should not be forced to choose between allowing a company to fall into a rapid and chaotic dissolution or to support the company with taxpayer money. That is unacceptable. There is too much at stake. Second, we are proposing a new and powerful agency charged with just one job: looking out for ordinary consumers. This is essential, for this crisis was not just the result of decisions made by the mightiest of financial firms; it was also the result of decisions made by ordinary Americans to open credit cards, take out home loans, and take on other financial obligations. We know that there were many who took out loans they knew they could not afford, but there are also millions of Americans who signed contracts they did not always understand offered by lenders who did not always tell the truth. Even today, folks signing up for a mortgage, student loan, or credit card face a bewildering array of incomprehensible options. Companies compete not by offering better products, but more complicated ones, with more fine print and hidden terms. This new agency will change that, building on credit card reforms I signed into law a few weeks ago. This agency will have the power to set standards so that companies compete by offering innovative products that consumers actually want – and actually understand. Consumers will be provided information that is simple, transparent, and accurate. You’ll be able to compare products and see what is best for you. The most unfair practices will be banned. Those ridiculous contracts – pages of fine print that no one can figure out – will be a thing of the past. And enforcement will be the rule, not the exception. For example, this agency will be empowered to set new rules for home mortgage lending, so that the bad practices that led to the home mortgage crisis will be stamped out. Mortgage brokers will be held to higher standards; exotic mortgages that hide exploding costs will no longer be the norm; home mortgage disclosures will be reasonable, clearly written, and concise. And we’re going to level the playing field so that non-banks that offer home loans are held to the same standards as banks that offer similar services, so that lenders aren’t competing to lower standards – but to meet a higher bar on behalf of consumers. The mission of this new agency must also be reflected in the work we do throughout the government. There are other agencies, like the Federal Trade Commission, charged with protecting consumers, and we must ensure that those agencies have the resources, and the stateof-the-art tools, to stop unfair and deceptive practices as well. Third, we are proposing a series of changes designed to promote free and fair markets by closing gaps and overlaps in our regulatory system – including gaps that exist not just within but between nations. We’ve seen that structural deficiencies allow some companies to shop for the regulator of their choice – and others, like hedge funds, to operate outside the regulatory system altogether. We’ve seen the development of financial instruments, like many derivatives, so complex as to defy efforts to assess their actual value. And we’ve seen a system that allowed lenders to profit by providing loans to borrowers who would never repay – because the lender offloaded the loan, and the consequences, to someone else. That is why, as part of these reforms, we will dismantle the Office of Thrift Supervision and close loopholes that have allowed important institutions to cherry-pick among banking rules. We will offer only one federal banking charter, regulated by a strengthened federal supervisor. We’ll raise capital requirements for all depository institutions. And hedge fund advisers will be required to register with the SEC. We are also proposing comprehensive regulation of credit default swaps and other derivatives that have threatened the entire financial system. And we will require the originator of a loan to retain an economic interest in that loan, so that the lender – and not just the holder of a security, for example – has an interest in ensuring that a loan is paid back. By setting common-sense rules, these kinds of financial instruments can play a constructive – not destructive – role. Over the past two decades, we have seen – time and again – cycles of precipitous booms and busts. In each case, millions of people have had their lives profoundly disrupted by developments in the financial system, most severely in our recent crisis. These aren’t just numbers on a ledger. This is a child’s chance to get an education. This is a family’s ability to pay their bills or stay in their home. This is the right of our seniors to retire with dignity and security. These are American dreams, and we should not accept a system that consistently puts them in danger. Financial institutions have an obligation to themselves and to the public to manage risks carefully. And as President, I have a responsibility to ensure that our financial system works for the economy as a whole. There has always been a tension between those who place their faith in the invisible hand of the marketplace – and those who place more trust in the guiding hand of the government. That tension isn’t a bad thing. It gives rise to the debates and dynamism that make it possible for us to adapt and grow. For we know that markets are not an unalloyed force for good or for ill. In many ways, our financial system reflects us. In the aggregate of countless independent decisions, we see the potential for creativity – and the potential for abuse. We see the capacity for innovations that make our economy stronger – and for innovations that exploit our economy’s weaknesses. We are called upon to put in place those reforms that allow our best qualities to flourish – while keeping those worst traits in check. We are called upon to recognize that the free market is the most powerful generative force for our prosperity – but it is not a free license to ignore the consequences of our actions. This is a difficult time for our nation. But from this period of challenge, we can once again tap those values and ideals that have allowed us to lead the global economy, and will allow us to lead once again. That is how we will help more Americans live their own dreams. That is why these reforms are so important. And I look to working with leaders in Congress and all of you to see these proposals put to work so that we can overcome this crisis and build a foundation for lasting prosperity.
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Financial Regulation Overhaul Details

by Chuck on June 16, 2009 · 0 Comments

On Wednesday President Obama is set to announce new regulatory plans for the financial industry.

The Obama administration [has released] a series of proposals that would involve the government much more deeply in the private markets, from helping to steer consumers into affordable mortgage loans to imposing new limits on the largest financial companies, in a sweeping effort to prevent the kinds of risk-taking that sparked the economic crisis.[...]

[...]It would vastly increase the powers of the Federal Reserve in an effort to create stronger and more consistent oversight of the largest companies and most important markets.[...]

My view: Vastly increase? How about we start taking powers away from the Federal Reserve.

[...]It also would create a new agency to protect consumers of mortgages, credit cards and other financial products.[...]

Many of the specific proposals will require legislation, and [the] announcement will drop the plan into an already heated debate on Capitol Hill about the eventual shape of reform. The financial crisis has forced broad consensus that changes are necessary, but there are wide disagreements about the details.[...]

My view: Just bring back Glass-Stegall.

[...]The proposed Consumer Financial Protection Agency would have broad authority to regulate the relationship between financial companies and consumers of mortgage loans, credit cards, checking accounts and other financial products. It would define standards, police compliance and penalize delinquent firms. Other agencies, particularly the Federal Reserve, would surrender some powers.[...]

My view: Wait a minute, the President just said it would vastly increase the Federal Reserve… which is it?

[...]And the agency would have a mandate to increase the availability of financial products in lower-income and underserved communities, in part by enforcing the Community Reinvestment Act, which requires banks to make loans everywhere that they collect deposits.[...]

My view: This is what started the sub-prime crisis to begin with… they want to start that all over again?

[...]The agency would gain new authority over the largest financial firms, including commercial banks such as J.P. Morgan Chase, investment banks such as Goldman Sachs and insurance companies such as MetLife. It would require those firms to hold greater capital reserves against potential losses, and constrain their ability to make high-risk investments.[...]

[...]The administration also will propose a new authority to dismantle these massive firms if they fall into trouble, through a process akin to bankruptcy.

And it will try to impose new oversight on financial markets for the sale of derivatives and asset-backed securities, investments made from mortgages and other loans.[...] Source: Washington Post

Federal Government white paper on financial regulation:

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New Financial Regulations

by Chuck on June 15, 2009 · 2 Comments

Treasury Secretary Tim Geithner and economic adviser penned an op ed piece for the Washington Post today. This is something that should be released by Government press statements (public domain), not to one specific news agency in my view.

—–

A New Financial Foundation
By Timothy Geithner and Lawrence Summers
Monday, June 15, 2009

Over the past two years, we have faced the most severe financial crisis since the Great Depression. The financial system failed to perform its function as a reducer and distributor of risk. Instead, it magnified risks, precipitating an economic contraction that has hurt families and businesses around the world.

We have taken extraordinary measures to help put America on a path to recovery. But it is not enough to simply repair the damage. The economic pain felt by ordinary Americans is a daily reminder that, even as we labor toward recovery, we must begin today to build the foundation for a stronger and safer system.

This current financial crisis had many causes. It had its roots in the global imbalance in saving and consumption, in the widespread use of poorly understood financial instruments, in shortsightedness and excessive leverage at financial institutions. But it was also the product of basic failures in financial supervision and regulation.

Our framework for financial regulation is riddled with gaps, weaknesses and jurisdictional overlaps, and suffers from an outdated conception of financial risk. In recent years, the pace of innovation in the financial sector has outstripped the pace of regulatory modernization, leaving entire markets and market participants largely unregulated.

That is why, this week — at the president’s direction, and after months of consultation with Congress, regulators, business and consumer groups, academics and experts — the administration will put forward a plan to modernize financial regulation and supervision. The goal is to create a more stable regulatory regime that is flexible and effective; that is able to secure the benefits of financial innovation while guarding the system against its own excess.

In developing its proposals, the administration has focused on five key problems in our existing regulatory regime — problems that, we believe, played a direct role in producing or magnifying the current crisis.

First, existing regulation focuses on the safety and soundness of individual institutions but not the stability of the system as a whole. As a result, institutions were not required to maintain sufficient capital or liquidity to keep them safe in times of system-wide stress. In a world in which the troubles of a few large firms can put the entire system at risk, that approach is insufficient.

The administration’s proposal will address that problem by raising capital and liquidity requirements for all institutions, with more stringent requirements for the largest and most interconnected firms. In addition, all large, interconnected firms whose failure could threaten the stability of the system will be subject to consolidated supervision by the Federal Reserve, and we will establish a council of regulators with broader coordinating responsibility across the financial system.

Second, the structure of the financial system has shifted, with dramatic growth in financial activity outside the traditional banking system, such as in the market for asset-backed securities. In theory, securitization should serve to reduce credit risk by spreading it more widely. But by breaking the direct link between borrowers and lenders, securitization led to an erosion of lending standards, resulting in a market failure that fed the housing boom and deepened the housing bust.

The administration’s plan will impose robust reporting requirements on the issuers of asset-backed securities; reduce investors’ and regulators’ reliance on credit-rating agencies; and, perhaps most significant, require the originator, sponsor or broker of a securitization to retain a financial interest in its performance.

The plan also calls for harmonizing the regulation of futures and securities, and for more robust safeguards of payment and settlement systems and strong oversight of “over the counter” derivatives. All derivatives contracts will be subject to regulation, all derivatives dealers subject to supervision, and regulators will be empowered to enforce rules against manipulation and abuse.

Third, our current regulatory regime does not offer adequate protections to consumers and investors. Weak consumer protections against subprime mortgage lending bear significant responsibility for the financial crisis. The crisis, in turn, revealed the inadequacy of consumer protections across a wide range of financial products — from credit cards to annuities.

Building on the recent measures taken to fight predatory lending and unfair practices in the credit card industry, the administration will offer a stronger framework for consumer and investor protection across the board.

Fourth, the federal government does not have the tools it needs to contain and manage financial crises. Relying on the Federal Reserve’s lending authority to avert the disorderly failure of nonbank financial firms, while essential in this crisis, is not an appropriate or effective solution in the long term.

To address this problem, we will establish a resolution mechanism that allows for the orderly resolution of any financial holding company whose failure might threaten the stability of the financial system. This authority will be available only in extraordinary circumstances, but it will help ensure that the government is no longer forced to choose between bailouts and financial collapse.

Fifth, and finally, we live in a globalized world, and the actions we take here at home — no matter how smart and sound — will have little effect if we fail to raise international standards along with our own. We will lead the effort to improve regulation and supervision around the world.

The discussion here presents only a brief preview of the administration’s forthcoming proposals. Some people will say that this is not the time to debate the future of financial regulation, that this debate should wait until the crisis is fully behind us. Such critics misunderstand the nature of the challenges we face. Like all financial crises, the current crisis is a crisis of confidence and trust. Reassuring the American people that our financial system will be better controlled is critical to our economic recovery.

By restoring the public’s trust in our financial system, the administration’s reforms will allow the financial system to play its most important function: transforming the earnings and savings of workers into the loans that help families buy homes and cars, help parents send kids to college, and help entrepreneurs build their businesses. Now is the time to act.

Timothy Geithner is secretary of the Treasury. Lawrence Summers is director of the National Economic Council.

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