The Group of Thirty (est. 1978) is:
a private,
nonprofit, international body composed of very senior representatives
of the private and public sectors and academia. . . . It aims to deepen understanding of international economic and financial
issues, to explore the international repercussions of decisions taken
in the public and private sectors, and to examine the choices available
to market practitioners and policymakers.
It just issued Financial Reform: A Framework for Financial Stability, which "addresses flaws in the global financial system and provides 18
specific recommendations" for additional regulation.
AEI's indispensable Peter Wallison raises an emperor's clothes type question in Regulation without Reason: The Group of Thirty Report:
A good summary is that bank-like regulation would be spread beyond the banking industry. But there’s a problem: banks have been tightly regulated for years, both in the United States and Europe, and of all the institutions hurt by the financial crisis, they are in the most trouble. How do the bankers, academics, and financial policymakers who make up the G30 deal with this? They don’t. In the wake of this report, the principal question that Congress, the Obama administration, and the American people should ask is why regulation should be extended to most of the major players in the financial system when it has been a consistent failure for banks.
One should also ask what existing regulatory authorities went unused. For example, Warren Buffet issued his classic characterization of derivatives in 2003:
other types of derivatives severely curtail the ability of regulators to curb leverage and generally get their arms around the risk profiles of banks, insurers and other financial institutions. Similarly, even experienced investors and analysts encounter major problems in analyzing the financial condition of firms that are heavily involved with derivatives contracts. When Charlie and I finish reading the long footnotes detailing the derivatives activities of major banks, the only thing we understand is that we don’t understand how much risk the institution is running.
The derivatives genie is now well out of the bottle, and these instruments will almost certainly
multiply in variety and number until some event makes their toxicity clear. Knowledge of how dangerous they are has already permeated the electricity and gas businesses, in which the eruption of major troubles caused the use of derivatives to diminish dramatically. Elsewhere, however, the derivatives business continues to expand unchecked. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts.
Charlie and I believe Berkshire should be a fortress of financial strength – for the sake of our
owners, creditors, policyholders and employees. We try to be alert to any sort of megacatastrophe risk, and that posture may make us unduly apprehensive about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.
So why didn't any of the regulatory agencies pick up this hint and try to introduce some transparency? Come to think of it, where was the Group of 30? Perhaps a little Maoist self-criticism is in order.