Tags: derivatives

Cox: More Regulation of Derivatives

By    |   Wednesday, 22 Oct 2008 08:11 AM

While some analysts have criticized the Bush administration for utilizing government intervention to solve the financial crisis, Christopher Cox, chairman of the Securities and Exchange Commission, calls for more government action.

In an opinion piece in The New York Times, Cox argues that derivatives must be regulated more closely.

Such a move is necessary to avoid meltdowns like the blowup of the credit default swaps market that brought down the world's largest insurance company, American International Group (AIG), Cox writes.

"Congress needs to fill the regulatory hole by passing legislation that would not only make credit default swaps more transparent, but also give regulators the power to rein in fraudulent or manipulative trading practices and help everyone better assess the risks involved," Cox writes.

"Congress could require that dealers in over-the-counter credit default swaps publicly report both their trades and the value of those trades."

The result? "This would make the market more transparent, and make it easier for everyone engaged in credit default swaps to assess their value," Cox maintains.

It also would allow the government to uncover cheats and scoundrels, he points out.

Cox isn't the only expert calling for more oversight of derivatives. Scott Pardee, a veteran Wall Street executive who is now an economics professor at Middlebury College, says risk managers must be given more authority at financial institutions.

"Risk managers have to be given stronger say. They should report directly to the board of directors, just like auditors," he told TheBigMoney.com.

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While some analysts have criticized the Bush administration for utilizing government intervention to solve the financial crisis, Christopher Cox, chairman of the Securities and Exchange Commission, calls for more government action.In an opinion piece in The New York Times,...
derivatives
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2008-11-22
Wednesday, 22 Oct 2008 08:11 AM
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