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AseanAffairs Magazine September - October 2010

Thai Prime Minister
Abhisit Vejjajiva

Four months on in the reconciliation process Asean Affairs examines the progress and shortcomings of Prime Minister Abhisit Vejjajiva’s plan to bridge

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Paul A. Ebeling, Jnr


wo years after the financial crisis that hammered the world’s economies and drove the U.S. economy into its deepest recession in more than 70 years, the U.S. Congress approved a financial regulatory overhaul also known as FINREG, sponsored by Senator Christopher Dodd and Congressman Barney Frank.

Now that the legislation is complete and President Obama signed the bill into law, political leaders on both sides of the aisle and around the globe, as well as media and economic scholars, are saying that the bill is flawed and that it provides no preventive guarantee to avert another world financial crisis.

After the legislation passed in July, President Obama was quoted as saying, “I’m about to sign Wall Street reform into law to protect consumers and lay the foundation for a stronger and safer financial system — one that is innovative, creative, competitive and far less prone to panic and collapse.”

The bill comprises 2,300 pages and is an ambitious attempt to rewrite U.S. financial regulations to curb the Wall Street actions that the public blamed for the global financial crisis in 2008, and to solve the systemic risk of the “too-big-to-fail” problem among financial firms and create a U.S. consumer protection agency.

Furthermore, the bill gives U.S. regulators broad authority over banks, limits risk-taking by financial firms and supervises previously unregulated international derivatives trading.

The final version of the bill left out many key provisions proposed by the Obama administration in 2009 to bring in the necessary votes from the Republican senators for passage. The bill is really a shadow of the sponsors’ hyperbole.

Savvy observers see the reform action as a battle between big Wall Street banks and big government. The hype is that Wall Street is the loser; it is not, and with that the Obama administration cannot claim to be a big winner.

Named after Senate Banking Committee Chairman Chris Dodd and House Financial Services Committee Chairman Barney Frank, the bill is described as another political victory for the Obama administration and after the landmark healthcare legislation enacted in March is being hailed by some U.S. Democrats as an historic win over greed-driven Wall Street banks.

President Obama said in a speech that there will be no more taxpayer bailout of the big financial institutions.

U.S. Republicans’ claim that the bill is anti-business and a “U.S. job killer” and that it may drive financial-sector jobs away from the USA to Asia, specifically Singapore. It is interesting to note that U.S. Republican Senator Richard Shelby, who worked with U.S. Democrats on the bill, condemned it as a “legislative monster.” Others rejected it as another “bad law.”

Many are saying that the Obama administration’s timing for legislation is not good when it is under huge political pressure for job creation. Many economists are very concerned that the “overhaul” will hurt the job market and slow down economic growth in the U.S. and around the world, including the Asean bloc.

U.S. Senator Dodd, a chief sponsor of the legislation and the ultimate politician, allowed that the American public must be persuaded to believe that the bill works to their benefit. Then is it really a sales tool for votes in the coming midterm November elections in the U.S.? I believe so! A quote from Senator Dodd, “We have got a marketing job to explain exactly what we’ve done, to get out and talk about it, not just in a political context but why it’s valuable to the U.S. and the world.”

Many economists and Mr. Geithner doubt that the bill can prevent another financial crisis like the one in 2008 in the U.S. or in the world. “It will not prevent a future world financial crisis, absolutely not,” Raghuram Rajan, a former International Monetary Fund chief economist who teaches at the University of Chicago, said.

Repeating a mistake is “human nature,” he added. Senator Dodd acknowledged the problem. “It is not a perfect bill; I will be the first to admit that,” he said. “It will take the next economic crisis, as certainly it will come, to determine whether or not the provisions of this bill will actually provide this generation or the next generation of regulators with the tools necessary to minimize the effects of that crisis.”

ASEAN: The engine of regional economic development

     ASEAN is fast becoming an engine for regional economic development, as well as of world economic development, an expert from the East Asian Institute of National University of Singapore said recently. Dr. Zhao Hong said Asean member countries not only export goods to other countries but also have become a big market that will also import more goods from other countries.

“In this sense, Asean is very important and is also a driving force in regional economic integration. So we can say Asean plays a very important role in the world today,” Zhao said.

Ministers from Asean member countries convened in Vietnam recently. “They have reached a consensus on economic cooperation and stressed that all the Asean countries will make greater efforts on economic integration in the Asean bloc and in East Asia,” he said.

“Apart from this, they also made consensus to improve regional economic integration and are becoming cooperative with other countries such as China, Japan and South Korea, so as to make economic recovery quicker and better in this region,” said Zhao.

He said the ministers believe Asean is open and is willing to accept other countries such as the United States, Russia, Australia and New Zealand to make this region more dynamic and more open.

“You can see 10 plus 1, 10 plus 3, and some years later it might be 10 plus 6, or 10 plus 8,” Zhao said, noting that this is because Asean is now a kind of driving force, and more and more countries would like to cooperate with it.

Asean is an organization accepted by many countries, and an increasing number of countries are now paying attention to this organization. At the Asean conference, the foreign ministers agreed the Asean summit would include Russia and the United States.

“Of course, Asean still has some problems, especially some disputes between countries in the region, but the member countries are making efforts to solve these issues. So I believe this organization has a very good future,” Zhao said.

He suggested that Asean member countries make greater efforts to improve their infrastructure and expand the exchanges and cooperation not only among the member countries but also with other countries in Asia such as China, Japan and South Korea.


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