TT's Lost in Tokyo — by TokyoTom

Please note my preceding posts, about the establishment of global financial governance, which has astonishingly thin coverage given its importance and implications. Has everyone been distracted?

Here is some background and discussion that may be useful, in chronological order:

“G-20 Shapes New World Order With Lesser Role for U.S., Markets“, Rich Miller and Simon Kennedy, Bloomberg, April 3, 2009

“Financial Stability Board Portends Economic Global Governance“, Jim Kelly (Director of International Affairs for the Federalist Society for Law and Public Policy Studies and Co-Director of Global Governance Watch), Global Governance Watch, April 21, 2009

“The End of America’s Financial Independence?” Gary D. Halbert, InvestorsInsight.com, April 28, 2009

“The Bloodless Coup of the Global Financial Stability Board: From Guidelines to Rules“,  Ellen Brown (author, “Web of Debt”) HuffPo, June 24, 2009

“WORLD GLOBALIZATION OF THE BANKING & REGULATORY STRUCTURE” , Joan Veon, NewsWithViews.com June 29, 2009

“Financial Stability Body Could Co-ordinate Global Banking – FSA“, Reuters, Oct 14, 2009

“Global banking body may be needed-FSA“, Huw Jones, informationliberation.com, October 19, 2009

“The proposed European Systemic Risk Board is overweight central bankers“,  Wlillem Buiter, Maverecon blog, Financial Times, October 28, 2009 (re: similar proposal to consolidate regulation in the EU)

“Thirty financial groups on systemic risk list“, Patrick Jenkins and Paul J Davies, Financial Times, November 29 2009

“Regulators list systemic risk institutions -FT“, Reuters, November 29, 2010

“The Financial Stability Board Lists Thirty Systemic Risk Institutions“,  WallStreetPit.com, Nov 30, 2009

“Regulators Resist Volcker Wandering Warning of Too-Big-to-Fail “, Gadi Dechter and Alan Katz, Bloomberg, December 4, 2009

“Volcker
is leading a chorus arguing for restricting the size or primary
functions of financial institutions. … Volcker, who heads President Barack Obama’s Economic
Recovery Advisory Board, told Kentucky’s Georgetown College
students “we need to produce more, finance less””

“What international experience tells us about financial stability regulatory reforms“, Michael Pomerleano, ft.com/economists forum, December 21, 2009

Finally, here is a link to the publications of the Financial Stability Board itself.

Here is a useful excerpt from Gary Halbert`s piece (The End of America’s Financial Independence):

“What follows are verbatim excerpts from the G-20 Communiqué that
pertain to the new Financial Stability Board (be sure to read the
bullet points below).

QUOTE

Major
failures in the financial sector and in financial regulation and
supervision were fundamental causes of the crisis. Confidence will not
be restored until we rebuild trust in our financial system. We will
take action to build a stronger, more globally consistent, supervisory
and regulatory framework for the future financial sector, which will
support sustainable global growth and serve the needs of business and
citizens.

We each agree to ensure our domestic
regulatory systems are strong. But we also agree to establish the much
greater consistency and systematic cooperation between countries, and
the framework of internationally agreed high standards, that a global
financial system requires. Strengthened regulation and supervision must
promote propriety, integrity and transparency; guard against risk
across the financial system; dampen rather than amplify the financial
and economic cycle; reduce reliance on inappropriately risky sources of
financing; and discourage excessive risk-taking. Regulators and
supervisors must protect consumers and investors, support market
discipline, avoid adverse impacts on other countries, reduce the scope
for regulatory arbitrage, support competition and dynamism, and keep
pace with innovation in the marketplace.

To this end we
are implementing the Action Plan agreed at our last meeting, as set out
in the attached progress report. We have today also issued a
Declaration, Strengthening the Financial System. In particular we agree:

• to
  establish a new Financial Stability Board (FSB) with a strengthened
  mandate, as a successor to the Financial Stability Forum (FSF),
  including all G20 countries, FSF members, Spain, and the European
  Commission;

• that the FSB should
  collaborate with the IMF to provide early warning of macroeconomic and
  financial risks and the actions needed to address them;

• to reshape our regulatory systems so that our authorities are able to identify and take account of macro-prudential risks;

• to extend regulation and oversight to all
  systemically important financial institutions, instruments and markets.
  This will include, for the first time, systemically important hedge
  funds; [emphasis added]

• to endorse and
  implement the FSF’s tough new principles on pay and compensation and to
  support sustainable compensation schemes and the corporate social
  responsibility of all firms; [emphasis added]

• to
  take action, once recovery is assured, to improve the quality,
  quantity, and international consistency of capital in the banking
  system. In future, regulation must prevent excessive leverage and
  require buffers of resources to be built up in good times;

• to
  take action against non-cooperative jurisdictions, including tax
  havens. We stand ready to deploy sanctions to protect our public
  finances and financial systems. The era of banking secrecy is over. We
  note that the OECD has today published a list of countries assessed by
  the Global Forum against the international standard for exchange of tax
  information;

• to call on the accounting
  standard setters to work urgently with supervisors and regulators to
  improve standards on valuation and provisioning and achieve a single
  set of high-quality global accounting standards; and

• to
  extend regulatory oversight and registration to Credit Rating Agencies
  to ensure they meet the international code of good practice,
  particularly to prevent unacceptable conflicts of interest.

We
instruct our Finance Ministers to complete the implementation of these
decisions in line with the timetable set out in the Action Plan. We
have asked the FSB and the IMF to monitor progress, working with the
Financial Action Taskforce and other relevant bodies, and to provide a
report to the next meeting of our Finance Ministers in Scotland in
November.

END QUOTE

You noticed that I highlighted the key word “all” in
the bullet points above from the G-20 Communiqué. If the FSB, in its
international wisdom, considers a financial institution or company or a
hedge fund “systemically important,” it may regulate and oversee it.
This provision extends and internationalizes the recent proposals by
Treasury Secretary Geithner and the Obama administration to regulate all firms that are deemed to be “too big to fail,” in whatever sectors of the economy they so choose.”

I see NO coverage of the FSB at ANY libertarian institution (based on a quick Google; if they have, I appreciate if it is brought to my attention).

I also note that the following is relevant to a portion of the FSB agenda: Reducing Interference with Accounting Standards and Devising Securities to Price Moral Hazard, Statement No. 277, Shadow Financial Regulatory Committee, AEI, September 14, 2009