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The U.S. is doing more of what it has become obsessed with doing - alienating other nations by a lack of genuine diplomacy regarding their sovereignty, and insulting their ability to govern themselves, or to even have their own laws. Now, we are telling international banks which have subsidiaries or affiliates in the U.S. that the parents have to conform to U.S. standards [chuckling from the audience] in order to allow their satellites (some of which are admittedly sizable) to continue to conduct business in the United States.
This is totally undiplomatic and decidedly against the interests of open international trade. It is increasing anti-U.S. sentiment and indirectly insulting many of our international trading partners at a very vulnerable time for the U.S. recovery. It is also wildly ironic that it was the major U.S. financial institutions that were the first to precipitate the U.S and then the World banking crisis! My late Aunt Carmen (who has never been on time for anything) would say, in her irritating nasal voice "It's like the blind leading the blind!"
We have done this before, and are still doing this with military 'democratization' [our 'Iraqistan' military meddling], an all-too-far reaching Federal Bureau of Investigations, a ritual bird flipping at the World Court (claiming ourselves exempt during the second Bush Administration, instead of finding a better-crafted way of keeping our president from facing war crimes-related charges, regardless of how baseless), and now, telling the international banking community that if they have subsidiaries, affiliates or other extensions of their banks in the United States, that the parents of these little tikes (mostly large foreign bank holding companies) have to abide by increasingly-stringent U.S. standards for the holding companies (many of which have many properties in the non-banking sector, too) which own them.
In the U.S., we have become altogether too fond of issuing ultimatums which carry no weight except to irritate others. Our announcements toward the international community are sounding more and more like kidnappers' ransom notes -- and written in crayon, to boot.
The article excerpt which follows comes from the SmartBrief Newsletter on Global Financial Markets:
US faces mounting opposition to proposals for foreign banks
The Federal Reserve has proposed rules requiring major foreign bank holding companies to increase capital and liquidity at US subsidiaries. Germany's Bundesbank and BaFin, as well as German and UK banks, are adding their voices to opposition. The rules would have a "negative impact on international cooperation since it does not take appropriate account of consolidated supervision following comparable home country standards", according to German regulators. Bloomberg Businessweek (29 Apr.), The Washington Post/The Associated Press (29 Apr.), Financial Times (tiered subscription model) (29 Apr.)
Let's be honest and clear. This is not remotely related to preventing another financial meltdown. This is strictly another case of the United States tactlessly overreaching its regulatory authority with an utter disregard to the feelings of other sovereigns, and an act of further U.S. protectionism against the competition imposed by foreign trade.
Without being overly opinionated about it, The Internationalist Page Blog thinks (blogs can think) that this is utter foolishness and short-term reactive policymaking with a side order of saber rattling. It is making us look very, very foolish.
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Douglas E. Castle