too big to fail

Re-Define Managing Director Sony Kapoor is interviewed by

Ex-Lehman banker says EU should crack down on big banks

Instead of addressing fundamental issues like the role of finance, politicians seem stuck in assuaging public anger, argues Sony Kapoor, manager of the international think-tank Re-Define, in an interview with EurActiv.
Kapoor, who has testified on financial regulation at the European Parliament, says world leaders have so far shown a lack of vision in reshaping the post-crisis financial system, arguing that it will be up to the EU's competition authorities to clean up.Outside Brussels, national leaders are missing the bigger picture, says Kapoor, though some have come up with "politically palatable" proposals.

Interveiw with Rob Johnson and Sony Kapoor on 'Too Complex to Fail'

Too complex to regulate? by Andrea Orr, Economic Policy Institute

Lawmakers seeking to prevent a repeat of the greatest financial meltdown since the Great Depression are considering ways to impose tighter regulations on big investment banks, where trading of credit default swaps and other derivatives reached unsustainable levels, helping bring the economy to the brink of disaster in 2008. Although they are commonly described as a form of insurance against defaults on home mortgages, the credit default swaps sold by A.I.G. and other firms became so widespread and complex over the past decade that it became almost impossible for the banks themselves, let alone outside regulators, to sort out the real value of these popular investments or assess the risk.

The rise in trading of derivatives — sophisticated financial instruments whose value is derived from something else such as home mortgages — also underscores how far so many banks have strayed from what should be their main mission of providing lending to individuals and small businesses to help support growth in the general economy. Critics note that derivatives trading escalated to a rapid back-and-forth exchange of paper certificates where the value often had little connection to real economic activity.

If “Too Big to Fail” and “Too Connected to Fail” have become the slogans justifying the repeated government bailouts of some major banks and insurers such as A.I.G., these firms’ continued resistance to tighter government restrictions might be summed up as “Too Complex to Regulate.”

That complexity is neither necessary nor useful, argue Robert Johnson, an EPI board member who previously served as managing director of Soros Fund Management as well as chief economist for the Senate Banking and Budget Committees; and Sony Kapoor, a former investment banker who now heads the international think tank Re-Define (Rethinking Development, Finance, and Environment). In recent interviews, Johnson and Kapoor discuss how Wall Street uses extreme complexity as a shield to pad its profits and keep regulators guessing, and why banks need to return to the sort of activities that serve people on Main Street.