Financial Crisis Inquiry Commission

The Basel I and II were heavily influenced by the economic thinking from German and Switzerland, both economies where housing prices are very stable. While it makes sense to have a 50% capital requirement for mortgage loans in Germany, that in no way made sense in Spain. Now look what happened to the Spanish banks. They had nowhere near enough capital to deal with the shock of their housing bubble bursting and now the government is partially nationalizing the financial system. That's good for exactly no one. Sometimes international cooperation is good, but we need to acknowledge that economies are different enough to warrant different requirements, which means a centralized one-size-fits-all response---like the Basel accords---is nonsensical.

Wall Street is very international. It seems you would both want to explain it internationally, not just where it boomed, but where it didn't. Texas comes to mind where regulation worked quite differently.

The criticism of the regulatory system reminds me of the development of the Greek financial crisis which reached its peak after the EU officials didn't reveal the information they had about the irresponsible government spending. I think the international organizations need to establish a much better system of financial regulation.

further empowering the rating agencies

The big open secret is that too much MBS junk was wrongly rated AAA by the regulation empowered top three agencies. Where are the lists of what financial products they rated AAA, and what happened over time to those ratings?

Allowing AAA debt to be used, like money, as Tier 1 capital, is what caused the bubble.

Proposed solution: There should be restrictions on total quantity of AAA debt -- and once that total is reached, only new debt that displaces old debt should get listed.