Jon Huntsman President 2012

FINANCIAL
REGULATORY REFORM

Europe today shows us what happens if we do not eliminate bailouts

FIXING BASEL

Governor Huntsman believes that risk needs to be acknowledged and managed properly. The Basel III Accord primes the pump for the next financial crisis by putting its thumb on the scale of sovereign debt, making it less expensive for banks to invest in those instruments without making a realistic risk assessment.

Going forward, financial institutions must incorporate realistic assessments of credit risk for all investment assets including sovereign debt; those assessments should not be limited to the Eurozone member states, but extend to all states whose debt carries potential risk.

Banks will make these assessments not because a regulator or government official tells them what the appropriate risks are, but rather because if they don’t get it right, they will face the risk of failure. Creditors must understand that the era of “moral hazard” is over. Europe today shows us what happens if we do not eliminate bailouts; they will continue to grow bigger and bigger, until they either ruin us through the effect on government debt, or lead to excessive inflation due to the actions of our central bank (or both).

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