1929 the great depression and Roosevelt's new deal reform greatly increased the role of the government in the financial system and strengthened the supervision of the financial system. The newly established Securities and Exchange Commission is responsible for supervising the securities industry and market: the Grice-Steagall Act orders commercial banks and investment banks to operate separately; Commercial banks may not set up branches across states to conduct business; The regulatory regulations also stipulate the upper limit of bank deposit interest rates; A government financial institution, Fannie Mae, was established to provide low-interest housing financing, and so on. However, with the development of economy and the profound changes in the pattern of financial market and competition, the financial supervision laws and regulations promulgated in11930' s are outdated and rigid. Since the early 1980s, the free market economic policies of American President Ronald Reagan and British Prime Minister Margaret Thatcher have rapidly dominated the world. Not only developed countries represented by the United States and Britain, but also emerging market economies and countries with transitional economies have implemented market-oriented economic reforms. Therefore, deregulation of the financial industry has become a global trend.
Today, the global financial crisis triggered by American subprime mortgage has once again aroused people's concern about financial supervision and innovation. Many scholars attribute the root cause of this crisis to excessive innovation and insufficient supervision, calling for strengthening supervision and limiting innovation. If this judgment holds, then strict supervision and restrictions on innovation are the natural answers to prevent future financial crises. First of all, the crisis exposed the loopholes and problems in the US regulatory system.
The extent to which this crisis is caused by excessive financial innovation and regulatory failure needs more comprehensive and in-depth study, but there is no doubt that this crisis has exposed many loopholes and problems in the US regulatory system. Mainly includes the following points.
First, the division of financial supervision system leads to the blind spot of supervision and the difficulty of coordination. As a federal country, the United States has formed a highly decentralized supervision system because of the special importance of decentralization and checks and balances in American political history and culture. The supervision power of commercial banks is scattered in the hands of the federal government and state governments. The Federal Reserve Bank supervises member banks, the Federal Deposit Insurance Agency supervises non-member banks, and the state banking bureaus are responsible for supervising state banks. Fannie Mae and Freddie Mac play an important role in the American housing financing system and are supervised by the Federal Housing Financing Agency. Savings and loan institutions specializing in mortgage loans are supervised by the Savings and Loan Supervision Bureau (OTS). Incredibly, mortgage brokers are not regulated at all. Relaxation of American mortgage standards; The uncontrolled credit risk has led to the proliferation of subprime mortgage issuance, which is the most direct and important reason for brewing this financial crisis.
Investment banks and securities companies are regulated by the Securities and Exchange Commission (SEC), but many derivatives that investment banks engage in, including commodity futures, are regulated by the Commodity and Futures Trading Commission (CFTC). How to coordinate between the two major regulatory agencies has always been vague. In addition, since the financial "Big Bang" in1990s, the Grice-Steagall Act, which dominated the American financial structure since the New Deal, has been abolished, and the business of commercial banks and investment banks has been increasingly infiltrated and overlapped. How to coordinate the relationship between the Federal Reserve Bank and the Securities and Exchange Commission, the Commodity Futures Trading Commission and other financial regulatory agencies has become a thorny issue.
As for the insurance industry, the federal government simply ignored it, and the States became the main body of insurance supervision. AIG Group is the largest insurance group in the United States and even the world, but there is no federal or local insurance regulatory agency to supervise AIG's parent company. Incredibly, it is supervised by an OTS that has nothing to do with insurance business. The disorder and fragmentation of the American financial supervision system can be seen from this.
Third, there are defects in the Basel capital standard. Basel Accord objectively encourages financial institutions, especially commercial banks, to set up SIV and transfer their business to off-balance-sheet operations. The Basel Capital Standard pays attention to market risk and credit risk, but not enough attention to liquidity risk. For a financial system that relies on the wholesale credit market, liquidity is more critical. Bear Stearns failed not because of insufficient capital or solvency, but because of liquidity problems. Liquidity is not only short-term funds and medium-and long-term funds, but also counterparty risk and leverage ratio.
Fourth, there is a lack of macro, unified and prudent supervision. Due to the separation of supervision and administration, once a systemic financial crisis breaks out and involves commercial banks, investment banks, insurance companies or other financial media, it will cause many difficulties in coping with and handling the systemic crisis. The first problem that the Bear Restaurant Stearns incident brought to the regulatory authorities was liquidity. As a lender of last resort, the Federal Reserve believes that financial institutions are too big to fail and too closely related to the national economy to fail. Even so, it was criticized and questioned. For example, Volcker publicly questioned the legitimacy of the Fed's "rescue" of Bear Stearns, arguing that it deviated from the power given by the Fed's law. Because of this scruple and other reasons, the Federal Reserve and the Ministry of Finance had to let Lehman Brothers go bankrupt. In fact, as early as the end of 2006 and the beginning of 2007, Paulson made a blueprint for financial supervision reform, diagnosed this chaotic problem, and put forward the concept of macro-prudential supervision centered on the Federal Reserve. Unfortunately, Paulson's blueprint for reform is still in the design stage, and the financial crisis in the United States suddenly erupted like a volcano.
Second, the crisis has put forward new requirements for financial regulatory reform.
This crisis has put forward new requirements for financial supervision reform, mainly including: 1. Integrate supervision and promote the formation of unified supervision and macro-supervision. 2. Raise capital requirements and pay more attention to liquidity risk and counterparty risk. 3. Promote centralized trading, settlement and supervision of credit derivatives. In addition, the reform also includes accounting system, market-oriented pricing principle, supervision of credit rating agencies, corporate governance of financial institutions and executive compensation, information disclosure requirements of hedge funds and PE companies and many other aspects.
In essence, the necessity of supervision stems from the internal failure of financial markets, including information asymmetry, moral hazard, adverse selection, conflict of interests and so on. These failures have caused potential damage to the whole market. Historical experience shows that the market mechanism itself has defects, and supervision must correct the market in time. But in fact, the failure of supervision or government is also widespread. The regulatory policies in Europe and Japan are usually stricter and more comprehensive than those in the United States, but they failed to avoid the financial crisis. Japan suffered a financial crisis for more than ten years. China's administrative supervision is not lax, but the banking, securities and insurance industries were once beset with problems.
Innovation is very important for the development of market economy. Financial innovation has played an active role in improving the efficiency of the financial market, strengthening and perfecting the financial system, improving the productivity of the whole national economy, meeting the diversified financial service needs of enterprises and families, promoting economic growth and improving national welfare.
In the final analysis, financial innovation is the product of market competition, technological progress, globalization and deregulation. As long as all or part of these basic forces continue to exist, innovation will continue to exist. We can't deny innovation, suppress innovation, suppress competition and suppress financial development because of regulatory mistakes, otherwise it is overkill. Supervision is by no means to control the market to death. On the contrary, the reasonable goal of supervision is to ensure the healthy and stable development of financial markets. Markets and financial institutions cannot solve the problem, and regulators may be even more incompetent. We can't count on the omnipotence of supervision. Third, the enlightenment of the crisis to China.
China can learn many profound and beneficial lessons from the global financial crisis, but we should not be afraid of future financial innovation because of this crisis. In fact, the American financial system is still the most developed, mature and innovative system in the world. We must analyze the imperfection of American regulatory system, as well as the dislocation and mistakes of supervision, so as to learn lessons, but we can't deny innovation because of regulatory mistakes. In ancient times, barter was the earliest way. Later, the emergence of money is a kind of financial innovation, and credit itself is also an innovation. The central bank system and deposit insurance system are both important and necessary institutional innovations. Innovation is the inherent need of the financial system itself and economic development. Ten years ago, when China started the reform of commercial housing, mortgage and mortgage loan appeared. At that time, mortgage was a new product in China's financial system, but as we all know, mortgage made an important contribution to the welfare of China people and the development of China's real estate industry and economy. After China introduced the securities market, it greatly increased the proportion of direct financing, promoted the diversification of corporate financing and equity structure in China, and also played a great role in promoting China's economic development.
Therefore, our conclusion is that we can't throw the baby away with the bath water. The financial systems of developed countries such as the United States still have a lot to learn from China. The United States may have excessive financial innovation, but generally speaking, China still lacks financial innovation. The financial supervision in the United States may be too loose in some aspects, but the current supervision system in China may still be too strict, harsh and rigid, which seriously inhibits financial innovation and hinders the deepening and development of financial markets.