5 Most Important Issues at G20 Meeting

By Eric Jackson11/11/10 - 04:00 AM EST

NEW YORK (TheStreet) -- It seems like yesterday that the most recent G20 was gathering in Toronto to discuss a more coordinated response by governments and central banks to deal with potential crises. That was five months ago. We're about to start a new G20 meeting, this time in Seoul, today.

It's useful to remember past expectations for these meetings and their results. G20 meetings tend to be heavy on hype going in, with plenty of chances for photo-ops and analysis by talking heads.

However, the crafting of the end-of-summit "declaration" starts a few hours after the leaders first sit down to talk. The final details are hammered out by underling administrators showing complete unanimity by all parties.

Recall that it was expected that the Toronto summit would center on countries pressuring China to let the yuan float upwards. The night before the event started, the Chinese government announced it would be open to such flexibility. The country offered no details on how or when it would make such adjustments (although it has followed through modestly since then). The announcement was sufficient to deflect attention from the issue for the meeting.

So, despite the recent rhetoric about the risk of future "currency wars" among countries trying to increase competitiveness, or the supposed anger by foreignfinance ministers over the Federal Reserve's decision last week to proceed with a new program of quantitative easing, or calls for China to -- again -- raise the value of the yuan against the dollar, I expect little discussion of these issues in Seoul or in the final statement.

So much of the public talking points we hear -- whether it's from Treasury Secretary Timothy Geithner, President Barack Obama or the Chinese government -- relating to these issues is mere "political theater" meant to score points with the public back home that government officials are doing something in their people's best interest.

So, rather than paying attention to these issues, it will be more interesting to monitor some of those that are less popular, but potentially significant, that don't attract attention from the folks back home and, therefore, can truly be issues where coordinated agreement can occur.

I think very highly of Canadian central banker Mark Carney. A Goldman Sachs(GS_) alum, he is a straight-talker and eminently reasonable, in my view. While young and early in his tenure at the bank, he is already highly regarded by Federal Reserve Chairman Ben Bernanke and other central-bank peers.

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[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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FinReg: Best and Worst Parts

By Eric Jackson07/21/10 - 05:59 AM EDT

Stock quotes in this article: FNM , FMCC , MCO , MHP

There has been a lot of complaining about the new Dodd-Frank financial regulation reform bill -- or FinReg -- by bloggers and politicians. However, most critics (and supporters) haven't read the 2,200+ pages of the bill. The reactions are driven more by pre-existing politics and shorthand biases for the general concept of governmental regulation.

If you think market actors are greedy and that the government keeps everyone honest, you support FinReg. If you think the government is made up of incompetent bureaucrats who get in the way of efficient markets and choice, then you think FinReg is terrible.

It's easy to be cynical about a big reform bill like this (and I am about a number of points in the bill). However, there is some good here. I believe that the politicians have used this bill as an opportunity to move a lot of little balls forward.

Critics trot out phrases like "this bill will do nothing to stop the next crisis." On one hand, they're right that it's hard for traders (let alone politicians) to predict the future. On the other hand, do they seriously think it's best to sit back after 2008 and do nothing?

In my view, here are the best parts of FinReg:

Derivatives OTC clearinghouses

Some estimate that the global market for derivatives is more than $700 trillion. Yet, a large part of it has operated between parties rather than through a clearinghouse. Now, it will and bank profits will go down. I think the system is better off and safer with this change.

Resolution authority

Former Treasury Secretary Paulson argued that he never had the "authority" to take over Lehman Brothers. Barney Frank has backed up Paulson's explanation, which is why he strongly supported the creation of this authority process to specifically deal with that one challenge.

Proxy access

This bill punted the idea to the SEC to define. Proxy access will determine whether shareholders can nominate directors to appear on the company's proxy statement for all shareholders to vote on at the annual meeting. This is good though. At the last minute, Chuck Schumer, Chris Dodd, and Evan Bayh (all Democrats) tried to water down proxy access by stating that shareholders should have to own 5% of the company's stock for over 3 years before being allowed to make a nomination -- thereby making 99% of shareholders ineligible. I'm grateful that Barney Frank pushed back.

A watered down version of Volcker Rule

I supported the Volcker Rule because I saw its intent was to lower the risk of financial institutions by getting them out of proprietary trading with assets that they would not have if not for the depositors' money sitting in "safe" bank accounts. Critics again howled that it wasn't part of the 2008 meltdown. This is one of those issues where I would ask the banks if they want to be short-term rich or long-term rich. Separating the trading from banking will allow all these banks to prosper in the long-term, even if they lose a few pennies in EPS over the next couple of quarters. It's discouraging that the bill version of this rule got watered down.

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[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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Frontline's Report on the Battle to Regulate OTC Derivatives in 1998

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