What will the next administration do? Financial Insights ventures some predictions.

“Financial Insights expects more legislation to protect consumers, incentives to reduce off-shoring, federal regulation of the insurance industry, more bank failures, and streamlining of
banking regulatory agencies.”

“Changes that will result likely include reform of mortgage origination practices, limitations on exotic investment instruments, the absorption of the Office of Thrift Supervision by the FDIC, federal regulation of the insurance industry, and increased capital adequacy requirements for all financial service segments (i.e., banking, insurance and capital markets).”

Is Financial Insights naïve? They want the industry to get intelligently involved in new legislation, but so far the lobbyists seem to be doing the traditional scramble for competitive advantage and protection. FI suggests they need to get smarter:

“It will be critical for financial institutions to actively involve themselves in regulatory efforts in a positive way. For example, instead of ignoring concerns about executive pay, financial institutions should make serious reforms, including institution of “clawback” provisions for compensation based on results which are later shown to be false, and election of directors
based on a true majority of votes casts, rather than a plurality.”

The Wall Street Journal led the way in comparing federal bailout funding to executive compensation and it looks like a close match – to taxpayers, this looks live shoveling in tax dollars and watching the executives walk away with it in promised compensation, bonuses, etc. NY AG Andrew Cuomo raises the useful question of why any leader in American financial institutions should receive any bonus at all.

Don’t expect that concern to make it to the executive suites very quickly, though.

One bad call:

“Treasury Secretary Paulson has taken control with a very firm hand; the new administration will likely stay the course, perhaps by keeping Paulson in his position.”

Have they missed the papers? Maybe the NY Times’ Paul Krugman? Paulson was very slow to identify the importance of the crisis, he has changed positions on how to use the $700 billion bailout, he did a lousy job of presenting it to Congress which led to the initial rejection, he initially asked for pretty much dictatorial powers for the Treasury Secretary with no review, and he has said he doesn’t want to stay and there is no indication Obama wants to keep him.

Hello, Boston. If you’re going to get into political economics, do a better job of research.

Strangely, nothing about the FDIC besides a mention – it and the NY Fed seem to have done particularly well through the crisis.

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