Tag: regulation

Today’s first lecture was given by Peggy Peterson, a Senior Advisor at Baker Hostetler and former Deputy Chief of Staff for Congressman Michael Oxley. As a versatile member of the government policy group, she has a solid background in policy and communications.

Today’s speech was about the Sarbanes-Oxley Act of 2002 (SOX), which was passed by the U.S. Congress to protect investors from the possibility of fraudulent accounting activities by corporations, therefore improving the accuracy of corporate disclosures. Ms. Peterson first shared some fond memories of Mr. Oxley and then detailed the creation of the Act beginning in 2001. After fully discussing its impact, she answered several questions from us with insightful answers.

Next, we visited the Association of Southeast Asian Nations (ASEAN). Our guest speaker, Marc Mealy, Vice President of Policy on the US-ASEAN Business Council, is very passionate, and had over 20 years of experience in international trading and economics.

Mr. Mealy first gave us a brief introduction to ASEAN and the role they play during the trading process. Next, he discussed the 1997 Asian financial crisis, and what the Asian countries learned from the crisis. He then introduced the Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership (RCEP). We really enjoyed the site visit and enjoyed enhanced awareness about international trading.

After a trip to the exterior of the White House, we had an opportunity to listen to a speech given by two directors from the Office of the US Trade Representative (USTR): Alexandra Victor and Mitch Gainer. Ms. Victor began with a detailed introduction of USTR. She mentioned the USTR’s mission and expertise, and emphasized its relationship with the trade policy advisory committee system and Congress. After Mr. Gainer spoke, the Q&A session started. The speakers first answered a question about intellectual property, and then pointed out that messaging was also a focus of USTR, in addition to economic gain. Next, they stressed the importance of negotiation when mediating the conflicts among TPP members. Finally, Mr. Gainer shared his experience of working for the Obama campaign.

Next, Kara Miller of the Office of Enforcement within the Consumer Financial Protection Bureau spoke to the group. She gave us an overview of the CFPB, the functions of each department, and multiple tools for consumer protection in order to improve fairness and transparency of the market. Many of our classmates asked challenging questions, and we had a great conversation with Ms. Miller.

Our last speaker of the day was Jared Bernstein, Senior Fellow at the Center on Budget and Policy Priorities and former Chief Economic Advisor to Vice President Joe Biden. We were grateful to listen to his speech, which was so insightful, as Mr. Bernstein is a passionate and knowledgeable professional. He answered different questions with regard to the different aspects of the economy, and whether it is in the midst of a strong recovery or a recession. He was willing to share his opinions on what the government has gotten wrong and what the government can do to improve. His view on the current political economy gave us a general perception of the overall economy which is fascinating. After a great day today, we look forward to our trip tomorrow!

Guest Bloggers: Ziwen (Jason) Huang, Daiwei Shi, Junyan (Eric) Zhang, Dong An (GMF 2016)

This is a series of blogs chronicling the experiences of 41 Global Master of Finance (GMF)dual degree students during their two week immersion course in New York and Washington, DC. Each blog will be written by a small subset of students during their experience.

The Financial Times reports there is a growing demand for jobs in financial regulation in response to industry scandals and calls for more oversight by investors and governments around the world. Greg Hutchings, director of specialized masters programs, tells the FT that there is also more focus on risk management jobs — a growing profession. In particular, the ability to identify, prevent and quantify risks for a company is in demand.
Link to article.

New research reveals the dynamics that influence how bank capital structure affects credit monitoring. The study titled, “Who Monitors the Monitor: Bank Capital Structure and Borrower Monitoring,” details how researchers measure the effects of a bank’s capital structure on its credit monitoring, and delivers new evidence explaining how government safety nets that enhance banking protections affect bank capital structure, and, in turn, influence bank monitoring and risk-taking behavior.

The research co-authors are Olin’s Anjan Thakor, and Sudarshan Jayaraman, associate professor of accounting at Simon Business School at the University of Rochester .

The research highlights four main findings:
* Banks take on less equity and more debt when creditor rights increase and the reverse when creditor rights decrease.
* This indicates that bank equity appears to provide stronger monitoring incentives to banks and that they need less of this mechanism when there is a lower need for monitoring.
* These effects are not driven by the supply side (i.e., bank creditors are more willing to lend to the bank when creditor rights increase).
* The increase in bank leverage increases the bank’s risk-taking appetite, especially when government guarantees are in place.

The co-authors studied legal reforms in 14 countries across Europe and Asia during the 1990s and early 2000s.

The researchers conclude that stronger creditor rights tend to increase the bank’s cost of debt, particularly when governments offer a strong guarantee to banks. These results indicate that stronger banking rights needs are not always better and that legal remedies that strengthen banking rights can bring about unintended consequences as banks incur higher debt and assume greater risks.

Read the complete news release from Simon Business School.

Related research from Anjan Thakor.

Image: Flickr Creative Commons: MNB: ninety odd years of banking 1825-1916, Claire T. Carney Library, University of Massachusetts Dartmouth

To begin day four, Jason Gould and Richard Choi, shareholders at the Carlton Fields Jorden Burt (CFJB) law firm, shared their insights about regulation and litigation in the financial services sector. CFJB surveyed many firms to investigate fraud in the financial industry. They are typically capable of breaking the fraudulent company down rather than putting the executives in the jail. They also shared some great thoughts about document preservation amid concerns of privacy security. Surprisingly, they hold a view that litigation is complicated and time-wasting.

Next, we departed for Capitol Hill, where Congresswoman Ann Wagner, (R-MO) was waiting for us. As a member of the Committee on Financial Services, she skillfully introduced us to the Retail Investor Protection Act (RIPA), transportation issues, human trafficking, as well as other legislation that has been implemented to protect access to affordable investments for middle class families.

In the afternoon, we welcomed Michael Spratt, Assistant Director of the Division of Investment Management at the Securities and Exchange Commission (SEC), and Jim Wigand, former Director of the Office of Complex Financial Institutions at the Federal Deposit Insurance Corporation (FDIC) with warm applause. Mr. Spratt offered a detailed description of the SEC’s role in Federal Securities Law with specific examples such as the 1933 Act, Dodd-Frank, etc. Mr. Wigand portrayed a big picture view of the role of the FDIC, and benefits that the FDIC has brought to depositors.

Guest Bloggers: Yali Ning, Huilin Liu, Xinong (Roy) He (GMF 2015)

This is the fourth in a series of 10 blogs chronicling the experiences of 31 Global Master of Finance (GMF) dual degree students during their two week long immersion course in Washington, DC and New York. Each blog will be written by a small subset of students during their experience.

It’s the multibillion dollar question: What drives economic growth? Diverse sources of capital and a thriving global financial system are key, according to a new report from the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness (CCMC).

Released last week and authored by Anjan Thakor, PhD, the John E. Simon Professor of Finance at Washington University in St. Louis, the report, “International Financial Markets: A Diverse System is the Key to Commerce,” provides a broad overview of the global financial system and how it supports economic growth, facilitates global trade and creates opportunities for companies, entrepreneurs and individuals.

“The global financial system is a vast combination of traded securities, markets and contracts,” said Thakor, who also serves as PhD program director at Washington University’s Olin Business School.

Prof. Thakor

“This study describes and examines this system from the perspective of the role the global financial system plays in facilitating economic growth and meeting the needs of individuals and companies. The main conclusions are that a robust global financial system helps economic growth, creates more opportunities for individuals and firms, and that it is highly interconnected.” Anjan Thakor

Along with those opportunities come challenges for regulators of institutions and markets in terms of striking a balance between the need for transparency in this system and the need to enable the system to facilitate economic growth, according to Thakor.

“Understanding how this system works, and how to support it, is critical as regulators on every continent look to modernize or alter current regulatory structures,” he added.

To accompany the report, the CCMC also has published an interactive infographic that shows the daily challenges faced by business owners around the world, and the ways main street businesses utilize the financial industry to overcome them.

The full report is available online here.

About the CCMC
Since its inception in 2007, the CCMC has led a bipartisan effort to modernize and strengthen the outmoded regulatory systems that have governed our capital markets. The CCMC is committed to working aggressively with the administration, Congress and global leaders to implement reforms to strengthen the economy, restore investor confidence, and ensure well-functioning capital markets.

About the U.S. Chamber of Commerce
The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors and regions, as well as state and local chambers and industry associations.

News Release by Julie Hail Flory, WUSTL Public Affairs