Fed Governor Tarullo's Four Step Plan to Economic Globalization
Are you taking notes, Bob Herz?
Via our friends at the Board of Governors:
Before discussing some of the very important initiatives that are under way, I think it important to specify what I believe should be the U.S. goals for international cooperative efforts.
First, to increase the stability of our financial system through adoption of strong, common regulatory standards for large financial firms and important financial markets. As events of the past few years have shown, financial stresses can quickly spread across national borders. Global financial stability is a critical shared goal.
Second, to prevent major competitive imbalances between U.S. and foreign financial institutions. A core set of good common standards will reduce opportunities for cross-border regulatory arbitrage, even as it promotes financial stability. This goal is particularly noteworthy as the United States tightens its domestic prudential standards.
Third, to make supervision of internationally active financial institutions more effective through a clear understanding of home and host country responsibilities and adequate flows of information and analysis.
Fourth, beyond the supervision of individual institutions, to exchange information and analysis in an effort to identify potential sources of financial instability and to take action to help mitigate the buildup of risks in international financial markets, particularly those potentially posing systemic risks.
Embracing these goals does not, of course, answer the often complex questions raised in specific initiatives, such as the degree to which rules should be standardized and the degree to which national variation or discretion is warranted in pursuing shared regulatory ends. But I do think it is useful to keep all of these goals in mind as we pursue our international agenda. Our task as U.S. regulators is to work to ensure that, together, the various international financial organizations produce reforms and practices that are consistent with U.S. interests and legal requirements.
That means giving on fair value, for one. Hell, why don't we just shelf our entire system of standards in favor of the rest of the world's? Oh wait, we already said we'd do that.