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Asia: Regulations reinstated

Updated On: Nov 17, 2008
Interestingly, after the 2008 global financial crisis broke out, Former United States Federal Reserve Chairman Alan Greenspan admitted that he erred while steering the US economy and now calls from tighter regulation instead of relying on free market which he had advocated all these years. Previously, Greenspan had fought off all attempts by the government and politicians to interfere with the market. He regretted fending off controls on financial derivatives which devastated the market and left banks in the US and Europe saddled with billions of dollars of liabilities. 
 
 
Greenspan now acknowledged the usefulness of regulations in combating fraud and settlement of trade. Philosophically, Greenspan declared that he had made a mistake in assuming the self-interests of organizations like banks and other financial institutions would protect their shareholders and their equity in the firms. He now advocates requirements for banks and securitizers to retain part of the securities they issue. This would motivate companies to ensure assets are properly priced for their risk.
 
A 27 member group, the Asian Economic Panel, which consisted of Nanyang Technological University (NTU) of Singapore’s Tan Khee Giap and Chen Kang as well as well-known US economist Jeffrey Sachs now argue that East Asian macroeconomic policy may be needed to save the current global downturn. East Asian including ASEAN countries but especially Japan, China and Korea can announce joint fiscal expansion tailored to their needs. 
 
 
China would use its funds to construct infrastructure or provide tax cuts while Japan could buy equities on the share markets. They could also use their regulatory powers to cut interest rates and stabilize currencies against a basket of USD and Euro. Another possible option is for major East Asian banks (including those in ASEAN) to provide credit swap lines between themselves using the US-Korea swap lines as one example. In general, a coordinated East Asian response, including ASEAN, could produce more sustainable results than through unilateral macroeconomic policies.
 
 
Sources:
 
 
Agencies, "It worked for 40 years, then..." dated 25-26 October 2008 in Today (Singapore: Today), 2008, p. 31.
 
 
Chan, Robin, “Asia Key to solving crisis: Experts” dated 15 November 2008 in the Straits Times (Singapore: The Straits Times, p. C20.






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