Germany Steps up Pressure for Bank Regulation

[FarCenter]

As Germany Friday, Oct. 10 stepped up diplomatic pressure to regulate financial markets under an eight-point plan, Berlin denied it had plans to nationalize commercial banks.

However, Berlin may inject equity into troubled German banks, its two top financial officials signaled as they arrived in Washington for Group of Seven (G7) talks.

...

So far, Germany has only had to guarantee a single, 50-billion- euro ($70-billion) bail-out for a mortgage lender, Hypo Real Estate, and it has been refusing to contribute to a joint EU bail-out for other banks.

Instead, its leaders have pointedly criticized deregulated financial markets in Britain and the United States and demanded action to bring markets under tighter rules.

Merkel keen on regulation

In a speech Friday in Dresden, German Chancellor Angela Merkel said, "In this crisis, we have to see the opportunity to persuade those who have not been persuaded so far that rules have to be established."

Ahead of a meeting in Washington on Saturday, Finance Minister Steinbrueck this week offered finance ministers an English translation of the eight-point plan of reforms he unveiled in a speech to parliament on September 26.

...

About half the German retail banking system is already state-run, with the federal and state governments either owning banks of their own or overseeing trustee savings banks and non-profit cooperative banks.

Among points in the eight-point plan are a call to put "innovative financial instruments" back onto bank balance sheets and increase bank liquidity "cushions."

Personal legal liability for bankers

Berlin also wants greater personal legal liability imposed on brokers and bank executives as well as changes to their pay incentives to stop them taking big risks to earn more.

In addition, Steinbrueck wants to stop banks packaging up mortgages and other loans as securities and selling these completely, eliminating all the bank's own risk.

In the plan, which has the status of Berlin government policy, he also said he wants regulatory authorities in the different countries to confer and work by standard rules.

http://www.dw-world.de/dw/article/0,2144,3705298,00.html

[malaise]

1. Germany is accustomed to a mixed economy

This is the correct move. What's more Europe is demanding that the US follows suit or there will not be lending any more money. Goodbye neo-liberal economics. There will be major changes at the IMF and World Bank. There is no consensus left for the Washington Consensus goons.

add.