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PassonChen
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电梯直达

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发表于 2009-5-3 22:29:44 |只看该作者 |倒序浏览

本帖最后由 PassonChen 于 2009-5-9 17:38 编辑

☆☆四星级☆☆Economist Debates阅读写作分析--Finacial Crisis
标出文中的GRE级别词汇：红色
文章中应用的写作技巧：绿色
作者的写作思路主线：蓝色
适应于AW中的例子或者思路：紫色
注释：粉红
结构
1#介绍

2#OPENING STATEMENTS
3#OPENING STATEMENTS
4#OPENING STATEMENTS

5#REBUTTAL
6#REBUTTAL
6#REBUTTAL

7#CLOSING STATEMENT
8#CLOSING STATEMENT
9#DECISION

10#COMMENTS

About this debate
As the financial crisis deepens, calls to re-regulate the world's financial industry are growing louder. After several decades of financial deregulation, is government re-regulation now necessary to improve the stability and functioning of the financial system? Or would re-regulation make a bad situation worse, by slowing financial innovation, introducing perverse incentives and perhaps even increasing risks?

This house believes that it would be a mistake to regulate the financial system heavily after the crisis.
41%
voted yes
59%
voted no
Representing the sides

Defending the motion

Professor Myron S. Scholes Frank E. Buck Professor of Finance Emeritus, Stanford University Graduate School of Business There is now a rising chorus among regulators, politicians and academics claiming that the freedom to innovate in the financial domain should be curtailed.

Against the motion

Professor Joseph E. Stiglitz University Professor, Columbia University The current crisis is caused, in part, by inadequate regulation. Unless we have an adequate regulatory system—regulations and a regulatory structure that ensures their implementation—we are bound to have another crisis.

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PassonChen
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沙发

发表于 2009-5-3 22:51:43 |只看该作者

本帖最后由 PassonChen 于 2009-5-9 18:02 编辑

☆☆四星级☆☆Economist Debates阅读写作分析--Finacial Crisis（2）

本帖最后由 PassonChen 于 2009-5-3 22:38 编辑

The moderator's opening remarks
Monday October 13th was Baroness Thatcher’s birthday. It was also the start of a week that has seen Western governments resolve to part-nationalise numerous banks in the biggest state incursion into free-market capitalism since the second world war. Those events, though coincidental, may not be entirely unconnected. The wave of deregulation since the 1970s, so associated with Thatcherism, has helped produce staggering increases in prosperity. But it may also have helped push the world to the brink of financial break-down.
最后两句可以看作一组句子，表达一个问题的两个方面。先正后反。由此，我们也可先反后正。

With that in mind, what better week could there be for holding a debate on how best to re-regulate the system after the credit crisis? And who more qualified to thrash it out than two Nobel-prize-winning American economists with famously forthright views on free markets.
Myron Scholes, who shared the Nobel prize for economics in 1997 for determining the value of derivatives, is one of the architects of complex, deregulated finance. His option-pricing theory, the Black-Scholes model, led to the explosive growth of options trading. He remains a practising hedge-fund manager, and has been investing in stockmarkets since his high-school days in Canada.

In support of the motion, “This house believes it would be a mistake to regulate the financial system heavily after the crisis”, he defends the innovations made possible by unfettered finance. The “proponents for re-regulation fail to measure the benefits of the myriad financial innovations that have succeeded since regulatory constraints were relaxed in the 1970s,” he argues. Indeed, heavy regulation has not stopped banks and broker-dealers collapsing in the past, he notes.

He proposes a light-touch response to the crisis, a simple requirement on banks to hold more capital to prevent them becoming over-leveraged. He explains why it doesn’t matter if the extra capital reduces a bank’s return on equity, because with less debt, the equity is less risky. Too much leverage, or too little capital, generally magnifies the effect of a shock, and causes a vicious circle of selling, he says.

All very well buttressed with financial theory. Joseph Stiglitz, his opponent, is sure to have none of it, however. Professor Stiglitz shared the Nobel prize for economics in 2001 for helping develop a theory of asymmetric information which showed that only under exceptional circumstances are markets efficient. Outside of the economics profession, he is better known for his withering critiques of the IMF and free markets, even while he was chief economist at the World Bank.

His opposition to the motion rests on the assertion that inadequate regulation has caused this crisis, and all those other crises leading up to it. Stronger regulation, relating to corporate governance, pay, lending practices, etc, is necessary, he argues, not least because American taxpayers are repeatedly on the hook for bailing out Wall Street. *He gives short shrift to the supposed benefits of financial innovation. “The fact of the matter is that most of that creativity was directed to circumventing regulations and regulatory arbitrage…” he says. It didn’t help ordinary people, nor did it do much to improve the economy’s efficiency.** New regulatory structures should be run by people less in thrall to those that they regulate. On only one point is there common ground: some additional regulation is inevitable as a result of the massive use of taxpayer money to rescue imprudent banks. But as to whether it should be a lot or a little, there is plenty of disagreement—which is probably true of society at large. Let’s see which side wins.
*这一句把重要的信息-主语和原因-放在了句首和句尾，中间的成份起节构作用，用很多节，感觉很有节奏。
**表达一个事物有两个不好之处的句型。

As far as possible, the debate will be regulated with a light touch, rather than a heavy hand. The more the audience gets involved, the better. But do be polite. As the Iron Lady so aptly put it, “I always cheer up immensely if an attack is particularly wounding because I think, well, if they attack one personally, it means they have not a single political argument left.” Happy Birthday m’lady.

The proposer's opening remarks

There is now a rising chorus among regulators, politicians and academics claiming that the freedom to innovate in the financial domain should be curtailed.
先破后立。待破的立场为：金融领域的改革创新的自由应当削减。
This stemmed from the apparent recent failures in mortgage finance and credit default swaps and the apparent need for governments and central banks to “bail out” failing and failed financial institutions around the world directly through capital infusions and indirectly by providing a wide array of liquidity facilities and guarantees. They claim that freedom in global financial markets has proceeded at too rapid a pace without controls—in particular with an incentive system that rewards risk-taking at the expense of government entities—and as a result “throwing sand in the gears” of innovation will reduce “deadweight costs” and “moral hazard” issues.
待破立场的理由：金融行业缺少失控导致了失败。
Obviously, these same proponents for re-regulation fail to measure the benefits of the myriad financial innovations that have succeeded since regulatory constraints were relaxed in the 1970s. And they fail to account for the vast increase in the wealth of the global economy that has resulted from the freedom to innovate.
破的理由一：自由金融体系的带来的利益被忽视了。到底怎样带来利益，没有充分论述。
Economic theory suggests that financial innovation must lead to failures. And, in particular, since successful innovations are hard to predict, the infrastructure necessary to support innovation needs to lag the innovations themselves, which increases the probability that controls will be insufficient at times to prevent breakdowns in governance mechanisms. Failures, however, do not lead to the conclusion that re-regulation will succeed in stemming future failures. Or that society will be better off with fewer freedoms. Although governments are able to regulate organisational forms, they are unable to regulate the services provided by competing entities, many yet to be born. Organisational forms change with financial innovations. Although functions of finance remain static and are similar in Africa, Asia, Europe and the United States, their provision is dynamic as entities attempt to profit by providing services at lower cost and greater benefit than competing alternatives.
破的理由二：金融体系革新导致失败再所难免，但对其进行管制也不能保证成功。
We would be derelict to regulate the financial industry heavily without attempting to understand the cost and benefits of regulation and without a thorough understanding of the causes of this crisis. With haste, new forms of regulation will probably not lead to less chance of further crisis and failures. History suggests that even the most heavily regulated banking (and broker/dealer) sectors have collapsed or nearly collapsed on myriad previous occasions. New regulations have supplanted old regulations to no avail. I reference here the Kindleberger – Aliber book, “Manias, Panics, and Crashes”, wherein myriad crashes or related incidents throughout the centuries are listed and discussed.
破的理由三：管制的利弊尚未被充分认识，因此盲目管制不可取。
对自己不是很有利：既然不管制已带来危机，那它就比管制更值得怀疑。
Crises are caused by banks having too much leverage. They face an “inflexibility trap” and “negative convexity”. Generally, a shock occurs, a “fat-tailed event”, and as a result a bank suffers a loss on a product line such as subprime mortgages that, in turn, requires it to reduce the risk of its equity. To do so, it must issue additional equity or sell risky assets to pay back debt. With leverage, to reduce risk needs action. If the bank attempts to raise equity capital, however, it faces the “inflexibility trap”. By issuing equity, debt holders have more capital supporting their debt and are better off. Equity holders must be worse off. That is, on the announcement of the offering, the price of existing shares fall. This follows from option theory. When governments infuse capital into banks, the new capital benefits the debt holders. This is the true “moral hazard”.
立之原因：此次经济危机的出现的根源在于银行对杠杆作用的滥用。
The simple remedy, therefore, is to require banks to have less leverage or—its converse—to have additional equity capital. This garners flexibility. And flexibility is valuable. It is an option. We can measure its value and price it accordingly. If society is to provide the option, it should charge for it in advance, and then it becomes the supplier of contingent capital to the financial system. This creates the correct incentives. This is not regulation; this is economics.
立之方案：减少银行的杠杆作用，增加资本净值。
“Negative convexity” arises as firms are required to invest to make money for their shareholders. When everyone else is driving over the speed limit, there is pressure to drive quickly as well; that is, more leverage to increase the return on equity capital. When a shock forces entities to reduce risk, they find it difficult to do so for many other entities are also attempting to liquidate positions at the same time. Not all the cars can slow down in time to prevent an accident. In financial markets liquidity prices increase dramatically, creating “fat tails”, and entities are unable to sell assets to reduce risks. With losses in one area, banks need to sell other more liquid assets. This, in turn, requires other banks to liquidate assets to reduce their risk. Liquidity prices increase and asset values fall across all markets as banks demand liquidity to reduce risk. This causes a deleveraging cascade in the financial markets affecting the capital of all banks.
立之理由一：杠杆作用导致失败的机理：我有点没搞懂。

Although I don’t have the data available, I predict that bank capital ratios have fallen dramatically over the last 20 years, with deregulation of the banking sector in the 1990s, coupled with the advent of the Bank for International Settlements’ implementation of Value at Risk, portfolio theory, that is in vogue to determine bank capital, and with changes in accounting rules.
立之理由二：银行的资本比率的下降。不过没有提供足够的证据。
Certainly, with additional equity capital, the return on equity capital of financial entities would fall, but the value of the enterprise would not be affected. Modigliani and Miller, over 50 years ago, wrote a classic paper in financial economics, demonstrating that the value of the firm is independent of its debt-to-equity ratio. For this and related work, each was awarded the Nobel prize in economics. Although the required rate of return on debt is less than that of equity, the required return on equity increases with additional debt to just offset debt’s lower cost. In its simplest form why would an investor pay more for a leveraged firm than an unleveraged firm if she could acquire the unleveraged firm at a lower price and create the same capital structure on personal account? Their simple and elegant model has withstood many academic attacks including issues such as the tax deductibility of debt or bankruptcy costs. Miller argued in his 1977 presidential address to the American Finance Association that these issues are second order, “akin to a horse and rabbit stew – one horse and one rabbit.” Although additional equity capital and less debt capital will not reduce the total value of the bank, it will reduce the expected return on equity. This is of no consequence, however, since with less debt the risk of the equity is correspondingly less. The return-to-risk tradeoff is unaffected. Investors will need to expect a lower return on equity capital. If individuals, hedge funds, etc, want to achieve a greater expected rate of return with commensurately more risk, they are able to achieve such by leveraging on their personal accounts.
Remember, however, that leverage is a two-edged sword. Wonderful when things are going well; a cancer when things are going badly. Since there are few costs and many benefits to this approach, capital requirements and pricing flexibility are the correct way to regulate banks going forward. Since this is the correct economic response, it trumps regulating the financial system heavily going forward. There is no need to “throw sand into the gears” to slow down innovation and new products. Capital is the solution and it is a form of “light regulation”.
立之理由三：减少杠杆作用能够发挥作用，无须加大管制。

The opposition's opening remarks
The current crisis is caused, in part, by inadequate regulation. Unless we have an adequate regulatory system—regulations and a regulatory structure that ensures their implementation—we are bound to have another crisis.
开门见山，既破又立：危机是由于管制不足造成，因此须加强管制。
This is not the first such crisis in the financial system that we have had in recent decades. Indeed, around the world, it is more unusual for a country not to have had a financial crisis than to have had one. They have occurred in societies with “good institutions”—like those in Scandinavia—and in societies without such institutions. They have occurred in developed and in developing countries. The only countries to have been spared so far are those with strong regulatory frameworks.
理由一：危机很多，但那些有着强大的监管机制的国家却没那么多。
In each case, the crisis has affected not just the lenders and borrowers, but also innocent bystanders. Workers have been thrown out of jobs as the economy plummets into a downturn, a recession or depression. Governments inevitably intervene, whether there is explicit deposit insurance or not. No democratic government can sit idly by while there is such suffering. There are, to use the economists’ jargon, externalities, and whenever there are externalities, there is a need for government intervention. There is, to some extent, some government insurance. Private insurance companies take actions to prevent the insured against losses occurring—for example, fire insurance companies insist on sprinklers in commercial buildings. The government has a responsibility to protect taxpayers, workers and others in our society and to do what it can to make sure that such crises are less frequent, and when they occur, less severe.
理由二：金融并非只是金融，它牵涉到社会问题，因此政府难免要介入。
Wall Street has asked for a massive bail-out—some $1.6 trillion so far, but most believe that this is just a down payment. The American taxpayer has bailed out Wall Street repeatedly—the S & L bailout, Mexico, Indonesia, Korea, Thailand, Argentina, Russia, Brazil and now this, the largest ever. One cannot keep asking for bigger hospitals and argue that nothing should be done to prevent hospitalisation in the first place.
理由三：银行在危机中需要政府的救助，需要纳税人的钱，但它却拒绝受政府管制，政府与人民在背黑锅。
Regulations (including those relating to corporate governance, incentive structures, speed limits, lending practices) are necessary to restore confidence. When, a hundred years ago, Upton Sinclair depicted graphically America’s stockyards and there was a revulsion against consuming meat, the industry turned to the government for regulation, to assure consumers that meat was safe for consumption. Regulatory reform would help restore confidence in our financial markets. We have seen how badly the banks have behaved; we have yet to reform the regulatory structure or change the regulators. Why, with the extra cushion of taxpayer money, of the kind proposed in the British bail-out, without such reforms, should we expect them to behave much better in the future than in the past?
理由四：管制能够增加信心；质疑没有管制的金融业今后是否能够表现出色。
Indeed, anyone who has seen America’s political processes at work knows that after Wall Street gets its money, it will begin fighting the regulations. It will say: Government must be careful not to overreact; we have to maintain the financial markets’ creativity. The fact of the matter is that most of that creativity was directed to circumventing regulations and regulatory arbitrage, creative accounting so no one, not even the banks, knew their financial position, and tax arbitrage. Meanwhile, the financial system didn’t create the innovations which would have addressed the real risks people face—for instance, enabling ordinary Americans to stay in their home when interest rates change—and indeed, has resisted many of the innovations which would have increased the efficiency of our economy. In some places, there has been real innovation—the Danish mortgage market (though it’s hardly new) is an excellent example, with low transactions costs and much greater security. But elsewhere in Europe, there has been resistance to adopting this model.
理由五：金融行业自由时的创新只是为了对抗管制而已，并没有给人民带来更多的保证。
Markets have failed, but so too has our regulatory system. No one would suggest that because our tax system is imperfect, with evasion and avoidance, we should abandon taxation. No one is suggesting that because our markets have failed, and failed miserably, we should abandon a market-based economy. And no one should suggest that because our regulatory system is imperfect, it should be abandoned. As Paul Volcker once put it in the middle of the East Asia crisis, even a leaky umbrella can be helpful in a rainstorm. To be sure, both markets and our regulatory structures need to be improved upon.
呼吁管制，管制太欠缺了。
Not only new regulations are required, but also new regulatory structures. The Fed and other regulators didn’t do everything they could have done with the regulations at their disposal. This is the not surprising consequence of appointing as regulators people who don’t believe in regulation.
不仅需要管制，更要有一个管制的体系。
A regulatory structure that worked after the Great Depression, before the invention of derivatives, is not one appropriate for the 21st century. We need to make sure that not just the voice and interest of Wall Street is heard, but so too the rest of the country, and we need to reduce the chance of regulatory capture. There was a party going on, and no one linked with Wall Street wanted to be a party pooper. As the old saw has it, the job of a good regulator is to take away the punch bowl when the party gets too raucous. But the Fed kept refilling the punch bowl, and now, we the taxpayer are asked to pay for the clean-up.
管制要兼顾人民的福利。
Those entrusted with looking after retirement funds, those who realise what an economic downturn can mean for workers, those without a vested interest in keeping Wall Street’s parties going have to have a large voice in a reformed regulatory system.
A good regulatory system has to take account of the asymmetries of information and other asymmetries between financial markets and government regulators. Those testing whether drugs are safe and effective may not have the creativity of those coming up with new drugs, but their tasks are different. Few would propose abandoning government oversight of drugs, simply because government salaries will be uncompetitive with those for testing the drugs in the private sector.
管制要考虑到信息的不对称。
Part of a new regulatory system must be a financial products safety commission, to make sure that no products bought or sold by commercial banks or pension funds are “unsafe for human consumption”. Ideally, such a commission would try to encourage the kind of innovation that would protect homeowners and make our economy more efficient.
管制需要一个“金融产品安全委员会”。
The question, more generally, is not so much too little or too much regulation, but the right regulation and a regulatory system that enforces the regulations we have. The risk we face is not that we will have too much regulation in the aftermath of the crisis but too little. After the crisis is over, the financiers who have done very well by themselves in recent years will use some of that money to distort the political process—campaign contributions have proven in the past to be high return investments.
问题的关键在于如何确立一个管制机制，以实现有效管制。
The system we had didn’t serve the country well. Financial systems are supposed to allocate capital and manage risks. However, risks were not managed, they were created, and capital was massively misallocated. But it did serve those in the financial system well. Many of these would like the old system to continue, with as little modification as possible. To do so would be a mistake.

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PassonChen
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发表于 2009-5-3 22:52:42 |只看该作者

☆☆四星级☆☆Economist Debates阅读写作分析--Finacial Crisis（3）

The moderator's rebuttal remarks

As several of those commenting on the opening statements have remarked, once it became clear that banks had become “Too Big to Fail”, more regulation was inevitable. You cannot bail out banks with taxpayer money without increasing oversight of them. The question in this debate is how “heavy” the regulatory response should be, which is where our debaters need to fight it out.
In their rebuttals, both agree on important points. Joseph Stiglitz accepts Myron Scholes’s argument that excessive debt was one of the causes of the crisis, and that additional restrictions should be placed on leverage. For his part, Professor Scholes accepts Professor Stiglitz’s argument that some of the “innovations” from modern finance were simply used to game the system.
But to work out how strong the safeguards should be, we need a fuller diagnosis of regulation’s costs and benefits. To make things harder, Professors Scholes and Stiglitz start from different points. Professor Scholes argues that during the heavily regulated era that followed the 1930s Depression “Western economies did not add value until late in the 1970s.” Mr Stiglitz starts in the 1970s and argues that markets have been more prone to failure during the period of deregulation that followed. Both these points of view may be correct, but which is more important? Barry Ritholtz, the featured participant, sums up the problem by saying that: “Over the past 30 years, the United States has moved from an environment of excessive regulation to excessive deregulation.” As Deleverage comments from the floor, “regulation and deregulation can both have unintended consequences.”
Professor Stiglitz wants to regulate against the excesses of the recent past. But that runs the risk of regulating away the benefits that have accompanied deregulation, such as the growth of global trade which has helped lift large swathes of humanity out of poverty. Professor Scholes meanwhile believes that regulation will stifle innovation. But, as Professor Stiglitz points out, he needs to provide more evidence that financial innovations have improved economic performance, rather than just benefiting a greedy few.
Federal Farmer, speaking from the floor, makes a good point: while deregulation is partly responsible for the current mess, regulation also played a part. So when Professor Stiglitz notes that there was widespread predatory lending at the bottom of the American housing market, he forgets that the American mortgage market is hugely regulated, with two state mortgage agencies, Fannie Mae and Freddie Mac, at the centre of it. Professor Scholes, meanwhile, talks of the importance of allowing innovators “to be rewarded and to fail”. But in this crisis, many banks have not been allowed to fail, because of the threat they pose to the financial system. Surely that means regulation should have stopped them becoming so risky in the first place?
Both debaters refer to pay, and seem to agree that there was some misalignment of interests involved. But when Professor Stiglitz talks about “incentive structures in financial markets [that] give rise to short-sighted, myopic strategies that involve excessive risk-taking”, he ought to take into account that employees of two investment banks that were wiped out, Bear Stearns and Lehman Brothers, owned much of the company stock. How does he account for this?
On the other hand, Professor Stiglitz is surely right in arguing that financial innovation is the means to an end: the improvement of human well-being. If it turns out to be a cost, it should be more tightly regulated. This point is borne out by Mr Ritholtz’s analysis. It provides evidence of an excess of deregulatory zeal in America in recent years that helped produce the current crisis. But does that mean we should turn the regulatory clock back? Or respond more creatively, as Professor Scholes suggests we should? We look forward to more submissions from the floor, and closing remarks from the two debaters that address some of these issues.

The proposer's rebuttal remarks
Oct 20th 2008 | Professor Myron S. Scholes
I agree that the recent financial shock provides the opportunity to re-examine the regulatory framework.  Regulation of financial institutions in the US must be co-ordinated with those in other countries as well.  That is no small feat.  Maybe only with a shock of this magnitude will the impetus be there to effect meaningful changes. The worry, however, is that regulatory output will not produce a comprehensive plan, but instead a regulatory nightmare that will not serve the interests of savers, investors, consumers or producers.  It most probably will stifle risk taking and innovation, which will slow growth and employment for decades.  The regulatory regime of the 1930s punished the banks and bankers who had employed excessive leverage and increased their compensation through “good-time earnings”.  Although regulatory policies failed during the 30s to bring us out of the depression until the disaster of the second world war, in reality, Western economies did not add value until late in the 1970s when we ended the shackles of a regulatory policy that impeded innovation and growth.  For the next decades, we are facing that same bad consequence. We have a choice to punish and to impede or to adopt regulatory policies that continue to foster innovation.
To innovate we must take risk and to innovate we must allow innovators to be rewarded and to fail. Warren Buffet and Bill Gates are innovators, risk takers and very wealthy men.  I have proposed that as a first step we increase bank capital requirements and banks should replace the government-owned preferred stock investments with additional preferred or common stock issues in the public markets.  Even with recent infusions of government capital, bank capital has only been restored to the level prior to write-downs.  It will take a long time before banks are able to add capital to reduce leverage, even longer if the economy weakens.  Determining the amount of leverage to be used by financial institutions is a business decision. And, since crises occur frequently regardless of regulations, governments should charge banks for the right to draw contingent capital at times of shock.  This allows banks to support their activities and reduce their risks slowly as liquidity returns to the market.
There is an additional regulatory area that needs discussion and thought: “an accounting framework for the 21st century”. It can’t be solved quickly and easily but is closely linked to leverage and guarantee issues.  Over the years, global accounting systems have become a patchwork of fixes to accommodate a different world.  It is time to rethink the entire accounting system and the information it provides.  Although we strive for transparency, without a model it is difficult to define what transparency means.  Full information does not guarantee value.  If, on the other hand, a regulatory body employed a model to measure the risk of the entity, it might need different inputs from those provided by the current accounting system.  The balance sheet, for example, is just a snapshot, and does not account for dynamics or shocks.
The components of a comprehensive risk-management system include:
(1) Allocation of sufficient capital to product lines to handle contingencies
(2) A means to allocate capital among competing alternatives
(3) An ability to select the level of risk through understanding the effects of adverse outcomes
(4) A feedback mechanism
(5) A process to report risks internally and externally
(6) A system of compensation that aligns interests with all stakeholders including taxpayers
(7) A capital structure that is aligned with investments in the firm
All of these components need an accounting system and data from that system to assist in making informed judgments.
For example, pay systems that are geared to a standard-form accounting system based on reported earnings are susceptible to gambling[might be worth checking; but I think that when an American says “gaming” they mean “gambling” in British English] at the expense of shareholders and other claim holders.  And, in the current debate, we are unable to determine whether mark-to-market accounting is appropriate, the unintended consequences of marking-to-model (fair-value accounting), or the implications of original cost (hold-to-maturity value). For example, European governments recently allowed banks to mark investments at hold-to-maturity values and guaranteed all bank deposits and inter-bank loans.  The US requires mark-to-market (and, more recently, fair-value accounting) and does not guarantee deposits or inter-bank loans.  With opacity, guarantees are necessary.  When liquidity prices are high and fair values are far above market prices, maybe fair-value accounting is a better measure of value, especially if liquidity prices are mean-reverting.  On the other hand, is fair-value accounting an unbiased measure of value?  These are only a few of the examples that point to the need for regulators, accounting professionals, practitioners, academics and investors to fashion a debate that sparks the development of a new risk-based accounting system.
We have rules in place to handle fraud, false claims, consumer protection and other illegal behaviour.  We need enforcement of those rules.  Let us evaluate whether the rules or their enforcement was insufficient before larding more rules onto the system.
I agree with Professor Stiglitz that some innovations are developed to affect regulatory arbitrage, or tax arbitrage, or to game incentive compensation systems or inflate earnings. These are all tactical in nature.  I believe, however, that the vast number of innovations is strategic, adding value for savers, consumers and producers in the economy.  One piece of evidence to support the value of innovation has been the amazing increase in global wealth after the breakdowns of regulatory constraints in the 1970s and thereafter.
Following others, Professor Stiglitz proposes that we establish a “financial products safety commission” to vet products sold or acquired by financial institutions.  This is not a new idea.  We have such safety commissions in place for most of our financial products.  Rating agencies in the US, Europe and Japan have rated myriad financial over-the-counter and listed-bond instruments for over a century.  There are so many financial instruments that the proposed government commission would be overwhelmed and duplicate what already exists.  It appears on the surface that with regard to sub-prime structures and related tranches that the agencies became advocates and not advisors.  In fact, many trusted advisors, from lawyers, to bankers, to accountants, changed roles to that of advocate.  Analysis of why these advisors changed stripes is important to understanding incentives going forward.
Other “commissions” include bank competition and consumer advocate agencies such as Consumer Reports, personal-finance websites and other services on the internet.  Maybe the sub-prime mess resulted from wrong models, wrong inputs, bad management and wrong incentives.  In part, it might have resulted from smart sub-prime issuers who realised that there was easy money at the expense of issuers.

The opposition's rebuttal remarks

I find myself agreeing with much that Myron Scholes has said.  Part of the problem is that the financial system has become excessively leveraged.  Imposing restrictions on leveraging will have little impact on the overall cost of capital—the basic insight of Modigliani and Miller.  But it will make our economy more stable.  We both agree that regulation of this kind would be of benefit.
The key question in dispute is whether additional regulations are required.  Professor Scholes worries that such additional regulations will stifle innovation.  And he seems to believe that innovations in the financial market in recent years have lead to increased economic performance, but he presents no evidence that that is the case.  We do know that the economy’s current problems are partially related to what were at one time described as “innovations”—interest-only mortgages, 105% mortgages, low-documentation mortgages (also know as liar mortgages).  The same Modigliani-Miller theorem that he cites argues that much of the slicing and dicing—repackaging of existing assets—should have had little impact on the efficiency of financial markets, especially if financial markets were relatively efficient before these “innovations”. These innovations did increase the lack of transparency in markets, and the lack of transparency has much to do with the current problems, where banks don’t know their own balance sheets and thus know that they can’t know those of others to whom they might lend.  That’s why the government has had to step in, to provide guarantees, in order to get credit markets working once again.
由自由创新带来的信息的不对称从宏观上造成了对整体的不利！所以政府须介入。
Is there evidence that the real cost of capital to firms in our economy has been lowered as a result of all of these innovations in a substantial way? And the lowering of costs has to be substantial—because the costs our overall economy is going to have to bear, as the economy sinks into a recession as a result of the financial crisis, are enormous, not to speak of the misallocation of resources that has occurred as hundreds of billions of dollars went into housing beyond people’s ability to afford and in places where it should not be.  Already, much of this investment is being trashed, as whole neighbourhoods are facing foreclosures and the blight spreads. Much has been made of the financial cost of the turmoil, but there is a commensurate real cost, measured for instance by the gap between what the economy is likely to produce over the period of economic slowdown and its potential—a number that is conservatively in excess of $2 trillion.
质疑自由革新的实质发作用：对方没有提供足够证据。
In my opening statement, I explained why regulations are needed.  Without regulations there is a risk of the kind of calamity we have faced.  Markets fail, and they fail systematically and frequently.  Professor Scholes is right: they fail with and without regulation.  But they have failed more frequently in the era of deregulation, partially because of deregulation. We need well-designed regulations.  A regulatory system needs to be flexible, to adapt to changing circumstances.  It has to be market oriented and recognise the limitations and costs of regulation. Restrictions on leverage are an example of one such regulation, but there are others.
Most of us feel more comfortable knowing that the banks in which we deposit our money are not being run by criminals. Even if there were good regulations about what banks could do with depositor money, we know that they might circumvent them. Having government regulations on who controls banks provides some confidence to the financial markets.
Good information helps markets allocate resources well. Markets, however, often have an incentive for a certain degree of lack of transparency. That’s why there is increasing demand for transparency and disclosure. But that is not enough. Many of the problems in modern economies arise out of corporate governance, the separation of ownership and control. This gives rise to incentive structures that may benefit management more than shareholders. It is also clear that these incentive structures in financial markets give rise to short-sighted, myopic strategies that involve excessive risk taking. Excessive reliance on stock options has a further problem: it encourages bad accounting—efforts to increase reported profits—to pump stock prices up. The resulting deterioration of the quality of information in the marketplace inevitably leads to less efficient resource allocations—as we have seen.
指出现行体制下的许多问题。
A simple regulation, such as speed limits, restrictions on the rate at which, say, any bank can expand its portfolio of mortgages, would have prevented a large fraction of the crises around the world, at relatively little cost.
Well-designed regulations would encourage innovations that enhance the efficiency of our economy. A financial products safety commission that allowed banks to buy and sell “safe” financial products might encourage banks to innovate to produce mortgages that actually help people face the risks they confront—not products that force them out of their houses when interest rates or the unemployment rate rises.  Markets are marked by asymmetries and imperfections of information.  There is scope for those in financial markets to prey on less well-informed borrowers.  It has, for instance, been observed that there is a great deal of money at the bottom of the pyramid, and America’s financial system worked hard to make sure that it would not remain there.  They have engaged in widespread predatory lending.  The Fed has—a little late—now proscribed that.  That’s another example of the kind of regulation we need.
Financial markets may have to work a little harder to innovate, but they can do that.  Venture capital firms are an example of the kind of innovation that has enhanced the flow of capital to new, high-tech companies.  But these Silicon Valley firms are a long distance from the wheeling and dealing that occurred on Wall Street.  If they actually devoted themselves to identifying, for instance, the real risks the economy faces, they might actually come up with products that address these risks.  They might have invented inflation-indexed bonds, rather than resisted their introduction.
Some people will lose from the imposition of these regulations—those who would prey on the uninformed, those who would engage in excessively risky gambles with other people’s money. But most of us would benefit—a more stable economy may also be an economy that grows more rapidly.

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地板

发表于 2009-5-3 22:53:15 |只看该作者

☆☆四星级☆☆Economist Debates阅读写作分析--Finacial Crisis（4）

The moderator's closing remarks

There is a steely edge to both closing statements that gives a hint of how much heat this topic will generate in society at large after the crisis.
Myron Scholes, speaking for the motion, probably has the harder task. That is because, with so much taxpayers’ money shovelled towards saving banks from the follies of their bosses, it is predictable that demands for retribution are high. He concedes that some regulation is necessary, but passionately defends—and details—some of the financial innovations that deregulation has helped produce. He also makes a suggestion which he should have made earlier: that bad regulation may bear as much responsibility for the crisis as deregulation; he backs this up with several examples of how state intervention helped worsen America’s housing crisis.
Joseph Stiglitz, speaking against the motion, professes to share a lot of common ground with Professor Scholes, but I suspect it is not as much as he thinks. They both want better regulation, but Professor Stiglitz also wants more of it. Some of the differences are semantic (are Professor Stiglitz’s “speedbumps” any different from Professor Scholes’s “dynamic capital requirements”?), but some are profound. Professor Stiglitz appears to make his strongest call yet for a big re-regulation of the financial system, focusing on “core” institutions such as deposit-taking banks and pension funds. “The financial system has repeatedly shown that, without regulation, it simply cannot be trusted to manage other people’s money in a prudent way, without putting the entire economy at risk.”
Readers must decide which course of action they prefer, a light touch or a strong hand—and vote accordingly. They know that banks have gamed the regulatory system recently; but is that an argument for more regulation, or less? Would more safeguards help, or should we simply improve enforcement of existing ones? Remember that regulations tend to grow like weeds. Remember, too, that deregulation can leave holes in the ground big enough for money to pour away through.
When the earth stops shaking after this crisis, this is a debate that is likely to exercise governments around the world, shaping the future of finance. It is worth remembering that today’s advocates of wholesale re-regulation will not speak so loudly if the measures governments have taken to end the crisis bear fruit, limiting taxpayers’ losses. That, however, is still a big if.

The proposer's closing remarks

Joseph Stiglitz gives the false impression that I am against regulation. We have laws and we need to enforce them. He asks that I enumerate financial innovations and he argues that innovations that did occur were of little economic value. Banks have implemented myriad innovations that improved efficiencies and created value: (1) transacting in markets—eg, competitive markets, electronic trading, portfolios and individual stocks, derivative portfolios; (2) financing large-scale projects—eg, infrastructure projects, global investments, mergers and acquisitions; (3) saving for the future within one’s own country—eg, facilitating the movement of retirement savings from defined-benefit to defined-contribution plans; (4) risk transfer and risk sharing—eg, financial futures and over-the-counter hedging mechanisms: (5) development of market price signals—eg, multiple signals in many new markets; (6) and the reduction of market asymmetries, the dead-weight costs of transacting or interacting with others.
Before we impose “heavy regulations” such as undefined “speed bumps or limits”, we should review what did go wrong and why. After an aeroplane crash, engineers not politicians examine, in detail, the causes of the crash before making recommendations. We need the same here. For example, Mr Stiglitz suggests that we eliminate “predatory lending”. Although not a legal concept, if it makes sense to do so, we certainly should stop it, if legally feasible. As I said previously, transparency is a political catch-all and without a stated purpose for the information supplied is non-operative.
He argues that the venture capital industry in Silicon Valley has added value by innovating to supply capital to high-tech companies, a good innovation. Yet he also argues snidely that these firms are far from Wall Street, the heart of the financial crisis. He forgets, however, that Countrywide Financial (acquired near bankruptcy by Bank of America), Golden West Financial (acquired by Wachovia which was acquired near bankruptcy by Wells Fargo Bank) and Washington Mutual (in bankruptcy) surround Silicon Valley. And these banks sold their subprime-mortgage portfolios to Fannie Mae and Freddie Mac, Washington stalwarts. And Silicon Valley uses Wall Street to raise capital for their successful firms.
Mr Stiglitz argues for a flexible regulatory system. Regulation and flexibility are incompatible. And this leads me to fundamental questions that have judicially been avoided. What responsibility do the regulatory system and governments play in causing this and predecessor financial crises? If we agree that the shovel-full of sand that made this sandcastle collapse was the housing-price declines leading to subprime defaults, let us not in the full-scale review of this crisis allow government to escape from the light of inquiry. Why were Fannie Mae and Freddie Mac formed in the first place? Why was a quasi-government agency encouraged to issue large amounts of debt (not part of the federal deficit) to foreign countries and entities with an implicit guarantee, which subsequently became an explicit guarantee, to finance a mortgage boom? Why was legislation put into place to mandate the growth of subprime lending? Did government have a role in changing housing finance from that of the “milk cow” model, that is, an ability to pay down a mortgage from income after a substantial down payment, to that of a “beef cow” model, that is, no down payment and an ability to pay conditional on housing prices continuing to appreciate? Did the Federal Reserve Bank err by trying to save necessary adjustments to the economy after the “dot com and telecom” bust by keeping the real rate of interest low and, as a result, encourage asset-price bubbles, capped off by the Greenspan statement in mid-2003 that any “rate increases would be measured?” Why did Congress ignore the warnings that restrictions should be placed on the growth of subprime lending?
Governments mandated that the Bank for International Settlements develop risk-management systems, so-called value at risk, that was so flawed that risk management became impregnable to many in the banks, in addition to senior managements and their boards. Accounting systems became a Rube Goldberg invention. The Treasury and the Federal Reserve Bank did not have a battle plan in place to tackle this crisis or any crisis. For example, letting Lehman Brothers fail quickly led to tremendous unintended consequences (eg, loss of faith in money markets and banks, a stock-market crash and the subsequent “failure” of the entire global financial system). Forget moral hazard. The issue here was not whether to let Lehman Brothers fail, but to do so in an orderly manner. Interconnected financial markets need time to disentangle themselves.
For each bank anticipates that it will be able to liquidate financial instruments given anticipated flows in the market. The problem arises, however, when many banks attempt to liquidate assets at the same time to reduce risk and leverage. The information set is so vast that no intermediary knows what the simultaneous demands for liquidity might be among other banks in the system and what sequences will unfold. With losses, entities sell securities that are liquid and have not fallen in value. These sales, in turn, reduce prices and liquidity there as well, causing further sales and an increase in liquidity prices. Potential buyers do not know how much inventory still needs to be sold and if prices change whether other banks will be forced to sell as well. In addition, buyers do not know whether price declines result from liquidity or valuation issues and resist buying until they sort that out.
A new accounting/risk management system can be developed that not only benefits the financial system but also is regulatory "light". Capital requirements will become more dynamic. Charging banks for insurance in advance of future crises, which will still occur, will mitigate costs and will influence risk taking. Since every crisis is different, instead of moving forward with a micro-engineered approach that fights the last war with heavy regulations that will not protect against the next crisis, let us take this opportunity to establish a new framework that mitigates the costs of future crises and still fosters innovation.

The opposition's closing remarks

Myron Scholes and I have now agreed on many points concerning regulating the financial system, most importantly that at least part of the problems we are now facing is a result of inadequate regulation.  We even agree on many of the components of the regulatory system: restrictions on leverage, better accounting frameworks and compensation schemes that “[align] interests with all stakeholders including taxpayers.”  Professor Scholes and I agree strongly on the dangers of some of the prevalent forms of compensation:  “the interactions of pay systems that are geared to a standard-form accounting system based on reported earnings are susceptible to gaming at the expense of shareholders and other claim holders.” The problem is what was at stake was not just a zero sum game, in which the executives of the firms gained and others lost.  It was a negative sum game.  Our society as a whole has lost as a result of misallocated capital and excessive risk taking.  Rewarding executives on the basis of stock options provided incentives for providing distorted information—putting so much activity “off balance sheet”.  It was easier to boost executive pay by increasing stock price through augmenting “reported income” than by doing anything real.  But distorted information leads to bad decisions, as we have seen.
Indeed, successful reform cannot be limited to the financial system alone.  Flaws in systems of corporate governance contributed to the creation of these flawed compensation schemes, which resulted in excessive risk taking and distorted information.  Stronger and more effectively enforced anti-trust laws might have reduced the number of institutions that were too big to fail—some of which are now so big that they are almost too big to bail out.  Regrettably, as we rush to save the economy today, we are creating even bigger institutions—setting ourselves up for even greater problems in the future unless we adopt adequate regulatory structures.
Professor Scholes and I also agree that part of the problem is the failure to adequately enforce existing rules. The Fed had regulatory authority that it failed to exercise—until after it was too late, closing the barn door after the horses were out. We need a reform of our regulatory structures.  Again, part of the problem is incentives.  Self-regulation does not work.  Those in financial markets had an incentive to believe in their models—they seemed to be doing very well.  There was a party going on, and no one wanted to be a party-pooper.  That’s why it’s absolutely necessary that those who are likely to lose from failed regulation—retirees who lose their pensions, homeowners who lose their homes, ordinary investors who lose their life savings, workers who lose their jobs—have a far larger voice in regulation.  Fortunately, there are very competent experts who are committed to representing those interests.
Professor Scholes and I continue to disagree on two points.  He continues to worry that regulation will stifle innovation. No one is disputing that America has benefited from innovation over the past quarter-century or that there were regulatory excesses that need to be corrected.  I’ve argued that appropriately structured regulation will encourage the right kind of innovation.  With less scope for innovation directed at regulatory, accounting and tax arbitrage, effort will be directed at innovations that actually lower transaction costs and help households and firms manage the real risks which they face.
Within the financial sector, there have been important innovations, like venture capital firms.  But today, even this sector may be facing difficulties, another part of the collateral damage from the misdeeds of the rest of the financial sector.
The financial sector accounted for more than 30% of corporate profits in recent years—and yet, from a longer-term perspective, has contributed nothing—as the losses since mid-2007 have more than obliterated the profits of the boom years.  The misalignment of private returns and social returns is obvious—while many of the industry’s executives are far poorer than they thought just a few months ago, most have done, by the standards of ordinary citizens, very well indeed.
Professor Scholes also takes exception to one of the several suggestions for regulatory reform.  I hope that means that he is in agreement on most of the other regulatory reforms—such as restrictions on incentive structures, conflicts of interest, predatory lending and other such abusive practices, anti-competitive behaviour, and the imposition of “speed limits” (designed to restrict the excessively rapid expansion of, say, mortgage lending).  He worries about the suggestion for a financial-product safety commission.  Echoing a famous line, he seems to be arguing simultaneously that it can’t be done—there are too many products—and that it is already done—it would be duplicative of what is being done by, say, the rating agencies.  To be sure, it can’t be done perfectly, but it can be done far better than it has been.  The rating agencies have done an admittedly miserable job, but that is perhaps partly, again, because of flawed incentives—they were being paid by those that they were rating.  Competition among the rating agencies led to a race to the bottom. Fewer products, with greater standardisation, would themselves have further benefits, greater transparency and greater competition.  It is absolutely essential that the risks associated with the financial products bought and sold by our “core financial system”, commercial banks and pension funds—be fully understood.
I believe that great latitude should be given to consenting adults in dealing with each other, as long as they do no harm to others.  But these core financial institutions are entrusted with others’ money.  When they fail, our economic system fails, and there are large numbers of innocent victims.  That is why the government has come to the rescue—not just this time but repeatedly.  The financial sector has repeatedly shown that, without regulation, it simply cannot be trusted to manage others’ money in a prudent way, without putting the entire economy at risk.  And ordinary depositors, small investors and those saving for their retirement simply cannot, by themselves, exercise adequate oversight.  This is a quintessential public good.  We all benefit from well-regulated innovative financial institutions.  Our financial institutions have failed us—but in part they were simply doing what private-sector firms do, maximising the well-being of their executives.  We need a 21st-century regulatory system to make sure that, in the future, they take into account the broader consequences of their actions.
Good financial institutions are essential to a well-performing economy.  Our financial institutions have failed us, with the predictable and predicted consequences.  Part of the reason is inadequate regulations and regulatory structures.  We can do better.

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5楼

发表于 2009-5-3 22:53:47 |只看该作者

☆☆四星级☆☆Economist Debates阅读写作分析--Finacial Crisis(5)

Two Nobel-prize winners have argued their cases strongly and provocatively and Joseph Stiglitz has won. The house does not believe that it would be a mistake to regulate the financial system heavily after the crisis. The Economist would not necessarily share that view but, for now, the noes have it.
The final tally—41% for, 59% against—shows that as the debate progressed, Myron Scholes managed to garner increasing support for the motion—though, ultimately, not enough. Both he and Professor Stiglitz deserve great credit and thanks for their efforts. From the outset Professor Scholes’s task was complicated by the fact that, like Professor Stiglitz, he believed some additional regulation would be necessary. It is hard to argue against something you half believe in. But he warned of the dangers of over-hasty regulation, not least the risk that this would stifle the sort of innovations, such as better trading, pension and risk-pricing systems, which he believes have improved economic efficiencies. Like Professor Stiglitz, he believed that new capital measures should be put in place to prevent over-leverage among banks in the future. One of his strongest arguments—and something to bear in mind during all future debates on this topic—is that the government, too, was up to its neck in housing finance through (now nationalised) agencies like Fannie Mae and Freddie Mac. Regulation, like deregulation, can have perverse consequences.
Professor Stiglitz persuasively questioned the worth of the innovations that Mr Scholes set so much store by. They had bought little but trouble to the economy, he argued, and were mostly aimed at getting round existing safeguards. He wanted not just more regulations, but better enforcement of existing ones; regulators were too often captured by those they were supposed to be overseeing. His central argument was that financial crises appear to have occurred more frequently during the recent decades of deregulation and that, while the going was good, the climate appeared to have benefited financiers more than society at large. This is a particularly appealing argument when governments (ie, taxpayers) have had to foot a huge bill for bailing out the banks. The costs of financial folly will be with us for years.
Professor Stiglitz’s case was helped by Barry Ritholtz, a featured guest, who argued that an excess of deregulatory zeal had removed transparency from the system and destroyed trust. Bill Nichols, another guest, supported Professor Scholes with a “regulate by all means, but keep it simple” line of argument. The market, he argued, could start the process by putting bond and derivative markets on some kind of centralised clearing system. Our thanks for two very convincing contributions.
Thanks, too, for a superb response from the floor, with 398 people battling it out with the debaters (and, at times, amongst themselves). Many drew attention to the inherent difficulty in the motion: a lot hinged on what was meant by “heavily”. That is not a flaw. It will be the key point of contention as governments sit down, once the worst of the crisis is over, and ponder how best to prevent a recurrence. The Economist will weigh in on that debate. We believe that some additional regulation is inevitable—and even desirable—now that governments have rescued the financial system from the follies of hubristic bankers. Yet already there are signs emerging of governments who think they know better than the free market. That is tomorrow’s hubris in the making—and surely the topic of a future debate.
In the meantime, the next debate is on Tuesday October 28th. Please join us, and thank you for taking part in this one.

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6楼

发表于 2009-5-3 22:54:52 |只看该作者

本次辩论最终胜者是Professor Joseph E. Stiglitz
主持人的评价很经典：It is hard to argue against something you half believe in.个人觉得Professor Joseph E. Stiglitz 文采更好，论述视野更广阔，而Professor Myron S. Scholes 对金融自由似乎感情多于理性，因为它的很多观点实际上是向着金融管制的。不过两位都是诺贝尔奖得主，我太渺少，请大家自己取舍。

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