These are the thirty international bankers(any women? nope!), who have set out a plan for the future of our financial system. "Our" in this case means not just America's but the whole world's financial system.
“To sustain growth, economies must build and continually renew the physical and intangible capital that fuels productivity growth and innovation,” the report says. “The ability to develop modern infrastructure will determine whether emerging nations can fulfill their economic potential. It will take an enormous infusion of capital to build transportation networks and deliver education, health care, water, housing, and electricity to growing populations. Advanced economies, too, need long-term investment, since it is one of the few ways to boost economic growth during a time of deleveraging and necessary fiscal consolidation.”
To do that, they need investment dollars (and euros, and yen, and renminbi) that have long investment time horizons. It is hard to build a water purification plant or power grid with money that could be pulled away at a moment’s notice. ...WaPo
There are people in the US (and probably in France and China and India and just about every other nation represented by the membership) who detest the idea of electing leaders who think internationally. Transportation, power grids, and education are the province of each country, aren't they? Do we want China investing in our schools and universities, having the keys to our power grids?
Well, they already do. The rest of us either don't care or applaud the idea or at least see internationalism as something inevitable.
What the bankers see is a future for banks that is now being heavily influenced by the 2007 crash: a limited future, a "bank contraction," and new world in which "bond markets would do more of the work of financing global investment, at the expense of major global banks."
To help fill the gap created by the contraction of giant banks, the Group of 30 report calls on national and international financial regulators to “promote long-term horizons in the governance and portfolio management of public pension funds and sovereign wealth funds.”
Other specific recommendations include creating new lending institutions with explicitly long-term goals, promoting corporate debt and equity markets in Europe and emerging markets, and to gradually, carefully liberalize the ability of capital to flow across borders so that emerging markets can better benefit from global investment dollars without becoming unduly exposed to the risk of investors all pulling their money out at once. ...WaPo
That Washington Post report bugs me, frankly. I'll leave it in, but a far clearer, more informative and concise report at PublicServiceEurope.com is recommended in its place. For a start:
The analysis was produced by the Group of Thirty's working group on long-term finance, led by former Bank of Mexico governor Guillermo Ortiz, in conjunction with the consultants the McKinsey Global Institute. Other G30 members involved in the publication were the incoming Bank of England governor, Mark Carney; the chairman of the United Kingdom's Financial Services Authority, Adair Turner; and the former president of the European Central Bank and current G30 chairman Jean-Claude Trichet.
In a foreword, Trichet and Jacob A. Frenkel, a former governor of the Bank of Israel, said: "The G30 identified an issue of major concern to both the public and private actors following the financial crisis: the efficient provision of a level of long-term finance sufficient to support expected sustainable economic growth in advancing and emerging economies. Flows of long-term finance via various routes are crucial to bring about sustainable growth and job creation." ...PublicServiceEurope
According to a report at Bloomberg, a California Republican representative will offer a bill in the House today "aimed at reducing the size of 'too- big-to-fail' banks by requiring them to hold more capital including long-term debt."
It comes as a number of lawmakers and regulators from both parties -- including Federal Reserve Governor Daniel Tarullo -- argue that the 2010 Dodd-Frank Act failed to curb the growth of large banks and express support for renewed efforts to limit the kind of systemic risk that fueled the 2008 financial crisis.
Three of the four largest U.S. banks -- JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. -- are bigger today than they were in 2007, heightening the risk of economic damage if one gets into trouble.
Banks typically fund their longer-term assets with short- term debt, making a profit on the interest-rate difference between the two. In a bank failure, stockholders are typically wiped out, and short-term debt can evaporate quickly as creditors refuse to renew commercial paper and short-term notes.
Campbell’s bill would require banks with at least $50 billion in assets to hold an additional layer of capital in the form of subordinated long-term bonds totaling at least 15 percent of consolidated assets. If an institution were to fail, the long-term bondholders would be guaranteed at no more than 80 percent of the face value of the debt. As a result, banks would face pressure to reduce their balance sheets.The extra layer of capital would be in addition to higher levels required as part of the Basel III international regulatory accords. ...Bloomberg