Critiquing Corker-Warner; The Great Privacy Debate Continues

Critiquing Corker-Warner:  Several columnists weighed in on the Corker-Warner bill, a bipartisan proposal that would, among other things, replace Fannie Mae and Freddie Mac with a federal "catastrophic" reinsurer and have private mortgage insurers take a first-loss position. Risk Doctor Clifford Rossi wondered whether the bill was actuarially fair from an insurance perspective. "It all comes down to the likelihood of realizing certain scenarios for credit losses over time and stipulating a threshold based on extremely rare events," he wrote. "The problem is that establishing the probability of an exceptionally bad event isn't all that easy, as we found during the mortgage meltdown." Peter Wallison of the American Enterprise Institute argued the bill retained a fatal flaw of the GSE model. "We should recognize by now that insurance funds run by the government are not insurance in any meaningful sense," he argued. "The government does not effectively price for risk; it prices to confer political benefits, just as Congress delights in spending." One reader agreed with Wallison's assessment and added, "The Corker-Warner proposal is another in a long line of politically expedient interventions that actually deepens the government involvement beyond its predecessors."

Lessons from the Editors: In a post that originally appeared in the June issue of American Banker Magazine, Heather Landy, that monthly's Editor in Chief, wrote about the big lessons of small businesses. "My dad's business was in a rough section of Newark, N.J., which taught me a lot about life in a place that was worlds apart from the leafy suburb where we lived," she wrote. "I also learned how to file, how to arrange merchandise on peg boards and how to work a cash register." Meanwhile,American Banker Washington Bureau chief Rob Blackwell reflected on what banks can learn fromMicrosoft's Xbox PR disaster. 

The Great Privacy Debate Continues: In his latest Monetary Future column, Jon Matonis wondered aloud why there are no Fincen whistleblowers a la NSA's Edward Snowden. The reason is that Fincen is upfront about its surveillance of financial transactions, so there is little to expose. "Either willingly or begrudgingly, the world has embarked on a path of greater and greater transparency in a bargained exchange for the warm embrace of security," he lamented. "But, the ends do not justify the means in that grand tradeoff. A world where privacy isn't sacrificed and all human transactions aren't tracked is not only possible, but imperative. The alternative will be far worse than you can imagine." On the otherend of the spectrum, David S. Cohen, undersecretary for terrorism and financial intelligence at the Treasury Department, made a case for increased transparency in global financial markets. "Companies formed in the United States appropriately enjoy an air of legitimacy that facilitates access to the global financial system," he wrote. "The uncomfortable truth, however, is that some opaque U.S.-based companies have been used by drug cartels, international arms dealers, and corrupt officials to launder criminal proceeds … It is time to put an end to the misuse of companies to evade taxes and advance criminal purposes. " Where do you stand on the issue? Let us know in the comments below.

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