CityAM Bankers may wish to sweep LIBOR under the carpet, but it isn’t going anywhere, June 4, 2019.
Company Lawyer, Issue 8, Vol 40, pp 237-238
Company Lawyer, Issue 8, Vol 40, pp 237-238
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The most important post-crisis legislation in the USA is the Dodd-Frank Act, 2010. In this article, I argue that not all of it was relevant or necessary. The so-called Volcker Rule is both extremely cumbersome, and irrelevant but mortgage regulation, though part of the Act, did not go far enough.
Vol 36,No 5, Wolters Kluwer
It is always good to receive notice of an award that acknowledges one’s work. As I continued preparations to move to the United States this fall, I was gratified to receive notification from Jim Bowden, Academic Relations Manager at Emerald Publishing, letting me know that my paper, “Holding banks to account for the financial crisis?” — previously published in the Journal of Financial Crime — has been selected by the journal’s editorial team as the Outstanding Paper in the 2017 Emerald Literati Network Awards for Excellence. The web page of all winners is now live: www.emeraldpublishing.com/authors/literati/awards.htm?year=2017 
My paper is now freely available to all for one year (until next year’s winning paper is chosen) and will shortly be promoted as the journal sample article. Interested parties may download my paper here:
http://www.emeraldinsight.com/doi/abs/10.1108/JFC-08-2015-0041 Emerald representatives will be presenting the awards at a number of conferences over the summer, primarily in Europe, but also in Atlanta, Arlington, San Diego and Boston this fall. Emerald is committed to supporting and celebrating the work of its author community and we will be issuing a press release regarding these awards at the beginning of May. This will be posted on emeraldpublishing.com and celebratory social media posts will also be issued on Emerald social media platforms. 
It is always gratifying to be on the receiving end of a thoughtful and well-informed review of one’s work. Thus I very much appreciate The Financial Times’ Senior Columnist John Plender’s comments about my book on the collapse of Lehman Brothers.
Here are a few excerpts from Plender’s book review. You can find his entire commentary on FT.com. The collapse of Lehman Brothers in 2008 was not the cause of the great financial crisis but it was a spectacular curtain raiser to one of the most chaotic episodes in financial market history. Oonagh McDonald, a British financial regulation expert and former MP, brings a regulatory perspective to the story, exploring the multitude of flaws in the patchwork of rules that supposedly governed the way the big five US investment banks had previously been supervised. Above all she examines how, one weekend in September, Lehman went from being a bank with assets of $639bn to an insolvent wreck. It did not require much to make Lehman go up in smoke. At the end of its last financial year, it was so highly leveraged that its assets had only to fall in value by 3.6 per cent for the bank to be wiped out. The tale of how the management reached this point under the leadership of Dick Fuld is compelling. A strength of McDonagh’s book is that it recognises that this was really a property-based crisis. The reason that derivative instruments inflicted losses on their holders was that they derived their value from residential mortgages, commercial property and other financial assets. Those values started to collapse in 2006. The book is, in part, a primer on these structured products and on the way they are valued. It also offers detailed discussions of the different methodologies used to value property. But the conclusion is a broader, provocative exploration of the concept of market value, in which McDonald tilts at the efficient market hypothesis that underlay much of the thinking in finance ministries, central banks and regulatory bodies before the crisis. All best, Dr. Oonagh McDonald, CBE 
On February 3rd and 4th I shall be attending the European Money and Finance Forum in Frankfurt, as I am a member of the Societe Universitaire Europpeene de Recherches Financieres (https://www.suerf.org), which consists of central bankers and academics.
The European Money and Finance Forum is an independent, non-profit network association of central banks, supervisors, financial institutions, academic institutions, and financial sector practitioners. It provides a unique forum for information, research, networking and debate on financial and monetary issues, financial regulation and supervision, and monetary policy. The papers and discussions at the forum in Frankfurt will focus on the changes in the regulatory framework in the European Union – in particular, the single supervisory mechanism for major European banks. There will also be an address by Mario Draghi, the President of the European Central Bank on Feb 4th. That will, of course, be very important. The full agenda is visible here: https://www.suerf.org/SSMat1 I shall provide insights and observations from this important financial forum at some point in the future. All best, Dr. Oonagh McDonald, CBE 
I am pleased to be participating on a fast-paced discussion with other distinguished panelists on what to expect in global markets, economies and corporate finance in the year ahead.
When: January 14, 2016 - 5 pm Where: Thomson Reuters - London 30 South Colonnade Canary Wharf Organized by Reuters Breaking Views, the panelists are:
I shall write up my observations after the event and will post them here. If you are in London and would like to attend the event, please contact me through this website's Contact page. All best, Dr. Oonagh McDonald, CBE 
Last week, we officially launched the publicity campaign for my newest book, Lehman Brothers: A Crisis of Values, which is available now on Amazon.com.
I was pleased to participate in an exciting seminar organized by the Centre for the Study of Financial Innovation in London, which was attended by about 90 people, many of whom were drawn from banking: a head of risk management, former Lehman Brothers directors, directors of other banks, bond and derivative traders, amongst many others. The Centre for the Study of Financial Innovation is a forum for debate and research about the future of the international financial services sector. I introduced the main themes of my book and the first commentator was Philip Augur, himself an author of books about banking and capitalism. He spoke very highly of my book as a work of real scholarship; I was, of course, very flattered. There followed a very lively discussion for almost two hours in which many supported the main themes of my book and others raised questions to which I had to reply, sometimes at length. This was followed by an interview with Jane Fuller, a co-director of the Centre. Click here to listen to the interview now. I welcome inquiries from other organizations, particularly in the US, where the Lehman Brothers crisis and lessons learned should be of particular interest.  Marie Swift, Dr. Oonagh McDonald and Matt Lynch
At its inaugural event in October 2015, WealthManagement.com hosted more than 350 members of the financial services' industry's elite at the Mandarin Oriental in New York City. I was pleased to attend as a guest of Marie Swift, whose US-based firm, Impact Communications, has been providing publicity service and promotional support for both my Freddie/Fannie and Lehman books.
I especially enjoyed meeting Matt Lynch, managing partner of Strategy and Resources, LLC, a leading strategy consulting firm in the financial services industry; Dan Kern, president of Advisor Partners, a respected asset management firm serving independent advisors and their clients; Joseph Belfatto, partner of independent wealth management firm Massey Quick; Rich Santos, publisher of Rep magazine and WealthManagement.com; and fellow book author/speaker/consultant Tim McCarthy (author of The Safe Investor). Thank you all for your interest in my work. I had a grand trip to New York City and Washington, DC, and will write more about some of the more meaningful conversations that occurred in a future blog post. Click here to view the entire photo essay. 
Bernie Sanders threw his hat into the U.S. Presidential candidate ring with this fiery statement: “It’s time to break up the largest institutions in the country! If a bank is ‘too big to fail’ it is too big to exist!”
Let’s take a closer look at this clarion call: Underlying Sander’s call for smaller banks is the belief that small is beautiful, with the assumption that the banks should somehow not be interested in making profits or in doing anything else but serving the community. Unfortunately that is simply not true – or a real possibility in the future. Many small and medium-sized banks failed during the financial crisis. The Federal Deposit Insurance Corporation provides a list of the number of bank failures in each year. There were only 3 in 2007. But that number rose to 157 in 2010 at the peak of the financial crisis. Thankfully, the closures slowly declined until the number reached 18 in 2014. The estimated cost of the failure of the federally insured banks is estimated at some $ 70 billion between 2008 and 2010. Altogether, 417 banks and thrifts failed from the beginning of 2006 through to 2011. Apart from bank failures, many banks with assets of less than $100 million have exited the economy themselves as a result of mergers, consolidations as well as failures. The mergers and consolidations were because they could not make a profit at that size. That is not just a matter of competition. It is because the costs of the technology banks need now continue to rise—and small banks simply cannot afford it. That is the case not only in the USA but in other countries as well. For example, co-operative banks in Germany share technology and have done for many years, yet the number continues to decline. Regulators there as in the USA and elsewhere encourage mergers and acquisitions in order to prevent bank failures. Regulatory costs fall more heavily on the smaller banks, but they still require supervision and sufficient capital to back their lending. Simply limiting the size of banks might solve the “too big to fail” concern, but limiting the size of banks is, on the flip side, more likely to raise the costs of providing banking services, which even for medium sized firms exporting goods, would include currency hedging. These are not just “esoteric financial products” but essential for firms engaging in trade. No doubt Mr. Sanders would regard such hedging as an esoteric financial product. But modern banking in a global world is much more than straightforward loans to small firms, mortgages and car loans. I would argue that large banks can obtain the expertise to provide more sophisticated services, which the large companies in the USA need. Size limits (and exactly how big would be too big?) could well increase the costs of providing banking services as large banks can spread the cost of all the developments in banking technology and provide services more cheaply. Not only does Sanders’ proposed bill set aside the issue of how big is too big, but it fails to say what would happen if a successful bank grew much more quickly than its competitors. The reward for success would be to limit success? Government intervention in a free market would be essential to keep the banks within whatever the pre-determined limits would be. For the causes of the financial crisis, Mr Sanders must look elsewhere: to the government housing policies, designed to encourage banks to lend money for house purchases to those on low and very low incomes and minorities, who could not possibly continue to pay their mortgages. This is not a bill, enticing as it may be, to which citizens should lend their support. It is far too simplistic. Bad bank lending is generally the cause of bank failures. And if we look back in time we can clearly see that the government housing policies of the 1990s-2000s (because they more than encouraged lending to those with too little money to pay back the loans) were the real cause of bank failures. I will be in New York City next week, September 21-25, and in Washington, DC, September 28 – October 2. If you would like to meet to discuss my work, please contact my publicist in the U.S., AlMartin@ImpactCommunications.org / 800-974-7753. My new book, Lehman Brothers: A Crisis of Value (Manchester University Press, November, 2015), will be out soon. I would be happy to discuss these important matters with concerned citizens and business leaders in the U.S. All best, Dr. Oonagh McDonald, CBE
On September 9, the Department of Justice (DOJ) issued a Memorandum entitled “Individual Accountability for Corporate Wrongdoing,” no doubt in response to the widespread criticisms of the failure to hold any senior executives to account for the banking crisis.
According to the DOJ, such accountability:
It should be noted however that holding individuals accountable is much more difficult than may first appear. For that to be effective for banks, that would require some fundamental changes in banking laws and regulations, such that banks could not hide who was responsible for what decisions. That has yet to come – and the timing of those types of banking laws and regulations is uncertain. Another question to ponder: Do fines change the culture of the bank? In my opinion, probably not. But the trend for prosecutors even before the crisis has been to prosecute companies rather than high-level individuals. This is presented as “transforming the corporate culture” because the various deferred prosecution agreements and non-prosecution agreements are ones in which the company agreed to take various measures to prevent such occurrences in the future. But perhaps in these cases the fines were about “recovering funds that are due to the American taxpayer”, as Freddie Mac’s CEO, Donald H Layton said in 2013. That leaves open the question of holding senior executives accountable and accountability in the future. That is really, in my opinion, the issue to be addressed. I will be in New York City next week, September 21-25, and in Washington, DC, September 28 – October 2. If you would like to meet to discuss my work, please contact my publicist in the U.S., AlMartin@ImpactCommunications.org / 800-974-7753. I am excited to herald the arrival of my next book, Lehman Brothers: A Crisis of Value (Manchester University Press, November, 2015), and to discuss these important matters with concerned citizens and business leaders in the U.S. All best, Dr. Oonagh McDonald, CBE |
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