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March 19, 2012

Two interesting reads on WTO conflict with financial re-regulation

In yesterday's New York Times, columnist Gretchen Morgenson sums up where we are at on avoiding another Wall Street melt-down:

Financial institutions, eager to maintain their profitable status quo, have lobbied hard against change. As a result, too-big-to-fail institutions have become even bigger and more powerful.  

In addition to lobbying, big financial players have another potential weapon in their battle against safety and soundness. This one is more hidden from view and comes from, of all places, the World Trade Organization in Geneva.

Back in the 1990s, when many in Washington — and virtually everyone on Wall Street — embraced the deregulation that helped lead to the recent crisis, a vast majority of W.T.O. nations made varying commitments to what’s called the financial services agreement, which loosens rules governing banks and other such institutions...

All this represents yet another paradox of our financial world: Even as our regulators try to devise a safer financial system, our trade representatives thwart efforts to reduce risks these operations pose to taxpayers.

Obama's trade team apparently had no comment for the article, which you can read here.

And over on the IDEAS web-page, veteran economist and policy analyst Andrew Cornford also discusses the conflict between the WTO services agreement and re-regulation, writing...

The introduction of the post‐crisis regulatory architecture for the financial sector reflects far‐reaching shifts in thinking concerning the appropriate scope and practice of financial regulation in comparison with that prevalent at the time of the drafting of the GATS rules on international trade in banking. These shifts have provided a further fillip to the debate among GATS commentators as to how far the rules accommodate prudential measures and reforms likely to constitute key elements of this new architecture.

He reviews the major interventions in the debate since the financial crisis.

Both Morgenson and Cornford's pieces are useful additions to the ongoing debate about ensuring that our trade rules don't get in the way of reining in Wall Street.

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Comments

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Very well written post. Love to read it.

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Earlier I read about the WTO conflict, but I didn’t have proper information about it but you have mentions all the conflicts, and issues in your blog post. I think that WTO should think about the project again, so that they can remove the conflict and make a good policy.

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I think that WTO should think about the project again, so that they can remove the conflict and make a good policy.

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