Saturday, November 22, 2008

Probable Treasury Pick Called for Reform of Securitization Earlier This Year

NY Fed President Timothy Geithner, who is the likely Treasury Secretary under President Obama, called for the reform of securitization in the first quarter of this year based on strongly enhanced risk management. Mr. Geithner said that the financial crisis exposed a weakness in the risk management systems of global finncial institutions. Federal regulators must insist that banks and other financial institutions have in place effective risk manageent processes. It would appear from his remarks that he would be on board with a federal systemic risk regulator, an idea favored by a number of policymakers, including House Financial Services Chair Barney Frank. The NY Fed chief also mentioned that the current overlapping and inconsistent system of federal financial regulation encourages regulagtory arbitrage.