The stock market is currently down 200 points this morning. Selling is across the board in many different industries. What’s been doing well recently is doing poorly today. Oil, gold and other commodities are down.
The Treasury Department said that demand for long-term financial assets dropped in April. Net buying by foreigners was $11.2 billion in April, down from $55.4 billion in March.
Tim Geithner and Larry Summers had an op-ed in this morning’s Washington Post. Here’s part of what they said:
“Our framework for financial regulation is riddled with gaps, weaknesses and jurisdictional overlaps, and suffers from an outdated conception of financial risk. In recent years, the pace of innovation in the financial sector has outstripped the pace of regulatory modernization, leaving entire markets and market participants largely unregulated.
“That is why, this week — at the president’s direction, and after months of consultation with Congress, regulators, business and consumer groups, academics and experts — the administration will put forward a plan to modernize financial regulation and supervision. The goal is to create a more stable regulatory regime that is flexible and effective; that is able to secure the benefits of financial innovation while guarding the system against its own excess.”
Geithner and Summers focus on five key problems.
1. Existing regulation focuses on the safety and soundness of individual institutions but not the stability of the system as a whole.
2. The structure of the financial system has shifted, with dramatic growth in financial activity outside the traditional banking system.
3. The current regulatory regime does not offer adequate protections to consumers and investors.
4. The federal government does not have the tools it needs to contain and manage financial crises.
5. The actions we take will have little effect if we fail to raise international standards along with our own.