Regulation Difficulties

A couple of the major ideas for reform in the banking system are: 1. There's talk about reducing the maximum size of banks, or capping the market shares within banks. and 2. there will be some form of increased separation between commercial banking and investment banking. But obviously this won't be easy to accomplish. Many of the current financial techniques in the United States, which were main contributors to the crisis (earlier posts have touched on some of those subjects/techniques), make it so big firms and corporations are able to avoid these regulations. Also, our financial system is obviously involved in global economic networks, so it is difficult to impose reform that would also prevent future crises on an international level as well.
http://www.forbes.com/2010/01/27/obama-volcker-economy-business-banks-oxford.html

One example dealing with the international tension among the bankers, is discussed in an article from the Wall Street Journal, "Banker Bashing Masks Rise of China." http://online.wsj.com/article/SB10001424052748704107204575039013978842230.html?KEYWORDS=banking+reform Here several countries met at the World Economic Forum in Davos, Switzerland, discussing mainly China's role in the global economy today. First of all, the United States dollar is the international dollar. This means that countries involved with international investments in the World Bank needs to trade or invest in the United States in order to receive our currency, which has been the way of the global economy ever since the world ended the era where countries used blocks of gold as their money investing. But now, due to our banking downfall, countries are unhappy with us still having that authority, thus having great tensions at the convention. But as of now, we the US would be affected by this negatively by keeping it this way as well. This article discusses a reporting from James Harding, editor of The Times, which explained more how this would affect our economy.

Among the most striking things he heard at Davos was the belief expressed by a senior Chinese official that the dollar carry-trade was the single biggest threat facing the global economy. The official was concerned that if the U.S. economy weakened, the unraveling of the trade—in which investors borrow at low interest rates in dollars and invest in higher yielding assets elsewhere in the world—would bring huge disruption to the capital markets. He estimated that as much as $1.5 trillion was already invested in such strategies.

So it makes sense that reforming our regulations is difficult on many levels, since we have to deal with other countries as well as our own. "The hostility against bankers [at the forum] was hardly surprising," said Gerard Baker, deputy editor-in-chief at The Wall Street Journal. What was surprising was "the ferocity and provenance of that hostility."

But since the bankers know reforms are vital right now, and are deeply concerned with what reforms are going to be implemented and how they are going to be implemented, they are unaware of their fellow US citizens' opinions and thoughts. An editor-in-chief for the Wall Street Journal, Patience Wheatcroft, quoted Christine Lagarde, the French finance minister, of the public's anger. "'Bankers still don't seem to get just how angry people are.' The backlash from companies that are resentful about the level of fees they have been asked to pay banks has also now come to the fore."