Cooperation needed to reign in financial cowboys
16 October 2008
Cooperation needed to reign in cowboys and speculators
The Green Party is supporting calls by British Prime Minister Gordon Brown for an internationally coordinated overhaul of financial regulation and will be pushing for the next New Zealand Government to join international action.
"The financial meltdown and ensuing Government bailout showed once and for all that the mantra of financial deregulation has failed. It's time to find new forms of international cooperation to protect society and the real economy from the destructive activities of the financial speculators and cowboys," Green Party Co-Leader Russel Norman says.
Brown has called for a new Bretton Woods agreement. Bretton Woods is the 1944 agreement that created a system of financial security and stability that lasted until the 1970s. The call has already been supported by the Norwegian Government and EU Central Banker Jean Claude Trichet, WTO head Pascal Lamy.
"We need better regulation and supervision of financial institutions but that can only occur globally. The next New Zealand government needs to get in behind such moves and help reform our financial markets to internationally agreed-upon principles of transparency, integrity, responsibility, and co-operation," Dr Norman says.
"Likewise, we need to bring such reforms home. Our central bank needs to be more proactive in supervising our financial industry here. I repeat my call for tougher requirements with the deposit guarantee scheme. "As Gareth Morgan said today, 'the Reserve Bank needs to sort out what a commercial bank is, what secured lending is, and where the implicit guarantee to depositors should begin and end'.
Otherwise we arrive at an even more perverse credit situation of no-risk lending. "The Bank also needs to address the reckless bonus incentives in CEOs' pay packages that encourage them to take the kind of short term risks that have led to this financial melt-down. We can't underwrite their risk-taking behaviours with tax-payer money and not expect some accountability in return."