Friday, April 11, 2008

some ideas for the g7

* Address the impact that mark-to-market accounting has had on financial institutions by looking for ways to reduce the extent to which the accounting rule will act as an accelerant during future crises.

* Seek to establish exchanges upon which large amounts of the $515 trillion of derivatives would become listed. In doing so, there would be more oversight of market participants and improved information for investors on the derivatives outstanding, including information on the types of investors holding the derivative positions.

* Endeavor to create a system whereby mortgage securities are given a UPC-like code that enables investors to track who owns the securities and learn more about the mortgages that underlie the security, right down to the ZIP code. In lock step with this action, holders of large amounts of mortgage securities should be required to list their specific holdings.

* Require rating agencies to create different systems for complex securities, placing emphasis on the need to alert investors on liquidity concerns.

* Endorse proposals by the Financial Stability Forum, in particular the need to more closely link the monitoring of liquidity risks to banks and investment banks.

* Continue to emphasize cooperation on liquidity issues recently addressed by the Fed, the ECB, and, reluctantly, the Bank of England.

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