Global Investors Blame US Loan Crisis on Lax Regulations, Want Oversight
The U.S. subprime mess is reverberating here and across the pond as politicians, regulators and financial specialists outside the United States are seeking an oversight role of American markets, banks and rating agencies. They feel that the United States is exporting financial products, but losses to investors in other countries suggest that American regulators are not properly monitoring the products or alerting investors to the risks.
Peter Bofinger, a member of the German government’s economics advisory aboard and a professor at the University of Wurzburg, states: “We need an international approach, and the U.S. needs to be part of it.
In the past, the U.S. has not be opened to outside monitoring, but analysts today feel that Europe and Asia have more leverage now in the wake of the recent problems relating to subprime mortgages.
“America depends on the rest of the world to finance its debt,” says Bofinger. “If our institutions stopped buying their financial products, it would hurt.”
From China to France, banks and investment funds have been recently hit with heavy losses after buying mortgage-related securities and complex financial products originating from the U.S. Investors were taken by surprise when the subprime market began to fall, as American rating agencies had given the products top ratings, leading buyers to believer there was little risk.
“In a globalized economy with hedge funds, leveraged buyouts, and all these investment funds, we have to ask the question about more transparency,” said Claude Bebear, chairman of the supervisory board of AXA, one of the world’s largest insurers.
Published on August 30, 2007
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