Will Greek Debt Crisis Spur Action on Financial Reforms?

I couldn't help but note the irony of the headlines at WSJ.com this evening:

• Finance Bill Is Blocked Again

  Republicans moved for the second time in two days to block Senate action on financial-overhaul legislation, denying Democrats the 60 votes needed to move forward on the measure.

  • Compare: The House and Senate Plans
  • Financial Regulation Watch

• Crisis Spreads in Europe

  Europe's hopes of containing Greece's credit crisis dimmed as the country's debt woes spread to Portugal, sparking a selloff in markets across the globe and testing the EUs ability to protect its common currency.

  • Greek Crisis Poses ECB Risk
  • News Hub: S&P Downgrades Greek Debt
  • Timeline: Europe's Debt Crisis
  • Euro Obscured, Amplified Portugal's Problems
  • Sovereign Debt Watch

-------------------------------------
Let's hope those sophisticated Wall Street risk management models are up to the task this time, as there may be some volatile days ahead in light of today's downgrade to Greek debt and growing concerns about a default there.  One measure of market fear (or complacency), the VIX, marked a return of fear to financial markets by rocketing upwards 20% today while the world stock markets sold off.  In case we needed a reminder, the financial world is interconnected; a potential sovereign debt default has worldwide repercussions. 

On the issue of consumer protection in the financial overhaul legislation, former Fed Vice-Chairman, Alan Blinder highlighted what to watch out for in the bill in the Wall Street Journal over the weekend (note his comments about the priorities of a CFPA housed within the Fed):  

"First, how much independence will the new agency have, especially for writing and enforcing rules? People who really believe in consumer protection want an independent CFPA. People who come to bury the CFPA, not to praise it, want to subordinate it to some more powerful agency.

Second, and related, to what extent does the legislation create an agency focused on a single mission: protecting consumers? Opponents of the CFPA concept would rather hand the responsibilities over to, say, the Fed, where consumer protection would be its fourth most important priority—after monetary policy, financial stability, and safety-and-soundness regulation.

Last, but certainly not least, watch how many institutions and financial products get exempted from consumer protection regulations. The more, the merrier for the industry—but not for the public."

Comments

[Jakob Bertel]

Well, they'll get a loan, the Greeks... that is what the EU is there for. However, I hope that the governments will be smarter this time, and put security on the loan. I wouldn't mind putting my savings on a greek bond if - in case not paid back in 15 years - I'll get one of these fancy appartments in Santorini!

JK