Harvey Goldschmid is co-chair of the Financial Crisis Advisory Group and Dwight Professor of Law at Columbia Law School, New York. He was a commissioner of the SEC between 2002 and 2005. Expanding on his earlier viewpoint, he added, âHedge funds, private equity and derivative products â all were not being covered in the United States by any realistic oversight, and thatâs unwise.â
Moreover, âthe way we were overseeing the private sector left a lot to be desired: the Office of Thrift Supervision (OTS) was a very weak agency, and yet it had some key banks that went under â Washington Mutual, among others.â Professor Goldschmid predicts further consolidation of bank regulators in the wake of the Obama administrationâs proposals to merge OTS with the Office of the Comptroller of the Currency (OCC).
But while many people have blamed âfair valueâ accounting for the financial implosion because it forced banks to record huge losses on toxic assets and crippling damage to their balancer sheets, Professor Goldschmid believes that the much-criticised accounting requirement actually provided much-needed transparency. âIt clearly helped to expose the [banksâ] vulnerabilities at an earlier point than might have been the case otherwise,â he added. âSo that was very healthy. âFair valueâ was helpful overall and not at all the cause of what went wrong.â
Andrew Sawers, editorial director, EuroFinance, commented, âItâs very refreshing to hear someone of the stature of Professor Goldschmid lay the blame where much of it belongs, and not use financial reporting regulations as a âshoot-the-messengerâ scapegoat. Our audience of corporate treasurers will be very interested to hear what else he has to say when he addresses our conference.â
Professor Goldschmid offered these words for the treasurers who are about to meet in Copenhagen, âThey are living in interesting times â without it necessarily being a Chinese curse. Itâs a dynamic period and theyâre just going to have to keep up.â