All Eyes on Basel...

The Financial Reform recently signed by the President eschewed net capital limits in favor of product limits and enhanced federal power to wind down/intervene with behemoth failures. Such approach leaves the possibility of enhanced capital restrictions to the representatives of 27 nations who met last week in Basel to reform worldwide banking standards.

But the Basel reforms themselves appear to have lost their umph.  See "In Basel, Eternal Work in Progress" (NYT, July 29, 2010).  Those reading the tea leaves from this European brew now predict wishy-washy definitions of 'net capital' and extravagant phase-in periods for the much anticipated changes.

What a shame.  The world seems to agree that internecine risk taking is unavoidable, and its precise manifestations always unpredictable.  That leaves limits on the coffers as the only rational means of preventing a recurrence of the present global crisis.  And yet it does not appear that those coffers that plunged us into despair will become subject to meaningful new limits in the near future.

Stated otherwise, ours shall remain a largely deregulated economy.

---JSC, 8/2/10