Message-ID: <29665705.1075859788879.JavaMail.evans@thyme> Date: Tue, 6 Mar 2001 04:28:00 -0800 (PST) From: smarra@isda.org To: tmorita@isda.org, rainslie@isda.org, yoshitaka_akamatsu@btm.co.jp, shigeru_asai@sanwabank.co.jp, kbailey2@exchange.ml.com, douglas.bongartz-renaud@nl.abnamro.com, brickell_mark@jpmorgan.com, henning.bruttel@dresdner-bank.com, sebastien.cahen@socgen.com, scarey@isda.org, jcohn@cravath.com, mcresta@cravath.com, dcunning@cravath.com, mcunningham@isda.org, jerry.delmissier@barclayscapital.com, shawn@blackbird.net, evangelisti_joe@jpmorgan.com, francois@us.cibc.com, tim.fredrickson@ubsw.com, gilbert_adam@jpmorgan.com, goldenj@allenovery.com, mark.e.haedicke@enron.com, fwhx9396@mb.infoweb.ne.jp, jhb1@bancosantander.es, quentin_hills@hk.ml.com, yhoribe@isda.org, milphil@gateway.net, skawano@isda.org, hiroyuki_keisho@sanwabank.co.jp, stevenkennedy@kennedyco.com, damian.kissane@db.com, kazuhiko_koshikawa@sanwabank.co.jp, robert.mackay@nera.com, markb@cibc.ca, marjorie.b.marker@us.arthurandersen.com, lmarshall@isda.org, donna.matthews@ubsw.com, mengle_david@jpmorgan.com, tom.montag@gs.com, dmoorehead@pattonboggs.com, jonm@crt.com, yasumasa.nishi@ibjbank.co.jp, dennis.oakley@chase.com, losullivan@isda.org, ernest.patrikis@aig.com, rpickel@isda.org, maria.rosario@db.com, arothrock@pattonboggs.com, rryan@isda.org, maurits.schouten@csfb.com, charlessmithson@mindspring.com, ksumme@isda.org, teruo.tanaka@ibjbank.co.jp, steve_targett@nag.national.com.au, mark.wallace@wdr.com, h.ronald.weissman@us.arthurandersen.com, twerlen@cravath.com, dpd@aurora.dti.ne.jp, chi-wing.yuen@aig.com, apapesch@isda.org, nlim@isda.org, kdhulster@isda-eur.org, esebton@isda-eur.org, cirens@isda-eur.org, rmetcalfe@isda-eur.org, mhitchcock@isda-eur.org, kengelen@isda.org Subject: ISDA PRESS REPORT - March 6, 2001 Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Scott Marra X-To: Tomoko Morita , Ruth Ainslie , "'Yoshitaka Akamatsu'" , Shigeru Asai , Keith Bailey , Douglas Bongartz-Renaud , Mark Brickell , Henning Bruttel , Sebastien Cahen , Stacy Carey , Josh Cohn , "'Marjorie Cresta (Cravath)'" , Daniel Cunningham , Mary Cunningham , Jerry del Missier , "'Shawn Dorsch (Derivatives Net)'" , "'Joseph Evangelisti (JP Morgan)'" , "'George Francois (CIBC)'" , Tim Fredrickson , "'gilbert_adam@jpmorgan.com'" , Jeff Golden , Mark Haedicke , "'Tsuyoshi Hase'" , Jose Manuel Hernandez-Beneyto , "'Quentin Hills'" , Yasuko Horibe , "'Michael Iver'" , Shigeki Kawano , Hiroyuki Keisho , "'stevenkennedy@kennedyco.com'" , Damian Kissane , Kazuhiko Koshikawa , Robert Mackay , Robert Mark , Marjorie Marker , Louise Marshall , "'Donna.Matthews@ubsw.com'" , "'David Mengle (JP Morgan)'" , Thomas Montag , Don Moorehead , Jonathan Moulds , "'Yasumasa Nishi (IBJ)'" , Dennis Oakley , "Liz O'Sullivan" , Ernest Patrikis , Robert Pickel , "'Maria.Rosario@db.com'" , Aubrey Rothrock , Rosemary Ryan , Maurits Schouten , "'Charles Smithson'" , Kimberly Summe , Teruo Tanaka , Steve Targett , "'Mark Wallace (Warburg)'" , "H.Ronald Weissman" , Thomas Werlen , "'Shunji Yagi (Sanwa)'" , "'chi-wing.yuen@aig.com'" , Angela Papesch-Sing , Nellie Lim , "Katia d'Hulster" , Emmanuelle Sebton , Camille Irens , Richard Metcalfe , Michelle Hitchcock , Karel Engelen X-cc: X-bcc: X-Folder: \Mark_Haedicke_Jun2001\Notes Folders\All documents X-Origin: Haedicke-M X-FileName: mhaedic.nsf ISDA PRESS REPORT - MARCH 6, 2001 * SEC to toughen reports' scrutiny - Financial Times * "Few" Banks Could Meet New Basel Rqmts Now - Dow Jones * A ragbag of reform - The Economist * No taste for risk: Are markets rejecting their traditional role? - Financial Times SEC to toughen reports' scrutiny Financial Times - March 6, 2001 By John Labate Securities regulators in the US plan to step up their scrutiny of company financial reports in response to changes in economic and corporate conditions. The move comes as the Securities and Exchange Commission (SEC) finds its accounting review resources freed up by the slowdown in filings for initial public offerings that were once the agency's main target. Last year companies faced a one-in-15 chance of being reviewed by SEC accountants, but the aim this year is to review as many as one in three reports. The change could mean companies face tougher inspection on a range of accounting issues that in the past might have gone unnoticed. Among the issues to get a heightened review are revenue disclosures, credit risk reporting, hedging techniques and derivatives exposures. SEC enforcement officials are also expected to raise their surveillance of financial fraud as new trends in manipulation of earnings have begun to emerge. "Annual reports are more likely to be selected for review this year," said Robert Bayless, chief accountant at the SEC's division of corporate finance. "We're returning to the historical norm after a two-year period of focusing on initial public offering issues." In the last five years some of the biggest financial frauds have been uncovered against companies such as Cendant and McKesson HBOC. Tens of billions of dollars in market value have been lost as a result. SEC officials have disclosed that more than 100 financial fraud investigations are under way and that more high-profile cases are likely to be announced soon. "We are finding more ingenious ways that revenues are being improperly enhanced. . . ," said Charles Niemeier, chief accountant at the SEC's division of enforcement. Another area of investigation involves corporate earnings warnings and how long a company might wait before disclosing news to investors. One unnamed company being investigated is said to have waited nine months before revealing a warning. "Few" Banks Could Meet New Basel Rqmts Now Dow Jones - March 5, 2001 By Jonathan Nicholson WASHINGTON -(Dow Jones)- Federal Reserve Gov. Laurence Meyer on Monday criticized the internal risk-assessment capabilities of U.S. banks. Meyer, in prepared remarks to be delivered to a meeting of the Institute of International Bankers here, also said few U.S. banks would qualify now for the relaxed treatment proposed under a new international agreement on how banks are regulated. That proposed update to the so-called Basel Capital Accord is expected to be effective in 2004. Meyer's prepared remarks didn't touch on monetary policy or the economic outlook. The proposed update to the Basel Accord was released in January. It calls for a three-pronged approach to bank regulation involving a new capital standard, increased scrutiny of a bank's own internal assessment of its capital levels and increased disclosure of risks to the marketplace. Banks would be allowed to use an internal ratings-based approach for some capital requirements. But Meyer said that would only work for banks with good risk-measuring capabilities. "As bankers, you should ask yourselves whether you are truly ready. The quick answer, 'we're there,' is probably wrong," Meyer said. "Based on our examinations of U.S. banks' internal risk-rating processes, I suspect that few banks would or should get a clean sign-off from their supervisor today." Meyer said banks have been "surprisingly slow" to link acceptable credit risks and assessments of capital adequacy, he said. The processes banks use to make internal grades of credit risks are also lacking, he said. "Most significantly, the rigor and internal consistency of the internal risk-rating process is often handicapped by insufficient or unclear rating criteria or by limited resources dedicated to independent reviews of risk-rating assignments," he said. Meyer urged banks to comment on the proposal now, while it is still undergoing development. Once adopted by the Basel Committee on Banking Supervision, it will be submitted to the central banks of the world's largest economic powers, Meyer said. After that, in the U.S., it will go through the usual rulemaking process. "The proposal may be complex and at times confusing, but I believe we are on the right track. We need regulatory capital standards that are far more risk sensitive than the one we have now and that provide the industry greater incentives to measure and manage risk," he said. A ragbag of reform The Economist - March 3, 2001 Across Europe's financial markets lies a colourful patchwork of regulation. In Austria, a government department watches over the markets, a task that the Irish leave to their central bank. The French have two main regulators for their markets while the Germans have three. With many countries still separating the regulation of banks, insurers and securities firms, there are about 40 different authorities currently tying up EU member states with red tape. These old structures, however, are changing. The British set a brand new example last year when they introduced a single all-powerful regulator, the Financial Services Authority (F5A), to watch over all their financial markets. And in February, an influential EU group of "wise men", headed by Alexandre Lamfalussy, a former chairman of the EMI, forerunner of the European Central Bank, endorsed the British model and recommended a single national regulator for each EU country. That led some to wonder whether what's good for Britain might be good for Europe too. Would the EU benefit from having a single "super-regulator"? The Lamfalussy group says that a single authority in each member state would bring economies of scale, more streamlined management, greater transparency and clearer accountability. Most EU countries say they are heading towards that goal, though so far only Denmark and Sweden have gone as far as Britain. Belgium, Luxembourg and Finland have merged the supervision of securities and banking, but in seven EU countries a separate institution still regulates the securities markets. The main motive for reform is clear: a broader constituency for each regulator is expected to reduce the inefficiencies in Europe's fragmented financial markets. This fragmentation diminishes the depth and liquidity of the markets and makes the cost of capital in Europe persistently higher than it is in America. It also makes it more difficult for entrepreneurs to find start-up funds. Per head of population, there is five times as much venture capital available in America as there is in Europe. America has one national regulator for its securities markets-the Securities and Exchange Commission (SEC). But it has several regulators for other parts of the financial system. The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Federal Reserve Board and the various state banking commissions all keep an eye on banks, while state insurance commissions regulate insurance firms. The regime is a mix of monopoly and fragmentation. Debate on the reform of financial regulation in America has emerged at irregular intervals, usually after the shock of a financial scandal. Whenever something goes seriously wrong-the stock market crash in 1987, the collapse of the notorious Bank of Credit and Commerce International, or the crash of Long-Term Capital Management in 1998- reform of financial regulation is hotly debated. Until now, though, no evidently superior solution for the regulatory conundrum has prevailed. So each country has been left to devise its own system. American markets have, by and large, pioneered those developments in recent years that have made the regulators' job much tougher-rapid innovation, internationalisation, and the broadening range of businesses in which individual firms take part. But none of these has led to radical reform. The American regulatory system has not changed fundamentally since 1934 when the SEC was set up. Two heads better than one? Discussion of regulatory reform in Europe has a shorter history. Most European regulators have not been established for long, and change in financial markets has been slower than in America. The pressure for reform has accelerated with the recent introduction of the single European currency and with technological progress. The euro (in effect, a single financial market for cash) has integrated national bond markets in the euro area, and has begun to do the same for equities. Investment managers now do their research on European bonds and equities by sector, rather than by country. At the same time, changes in technology have replaced many of the old high-decibel trading floors with electronic trading platforms. Supervising such markets is forcing regulators to rethink their traditional methods of regulation. The British government, eager to preserve the City of London's leading role in financial services, announced a reform of its system of regulation in 1997. For years, the City had policed itself with self-regulatory organisations that covered both wholesale and retail financial services. After a protracted debate about the wisdom of merging all these bodies into one super-supervisor, the British parliament finally passed the unwieldy Financial Services and Markets Bill last year. It is this legislation that established the pioneering FSA. The idea of a single regulator is now spreading across Europe. Hans Eichel, the German finance minister, wants to merge his country's three regulatory bodies (one each for banks, insurers and securities houses) into one Federal Agency for Financial Market Supervision. However, his plan is unpopular with state governments, always sensitive to incursions into their prerogatives. At the moment, they oversee Germany's eight bourses: the government of Hesse keeps an eye on the Frankfurt stock exchange, for example, while Baden-W_rttemberg watches over the bourse in Stuttgart. The French too are talking about merging their regulators. France's main supervisory authority is the Commission des Operations de Bourse (COB), but it shares responsibility with two other bodies: the Conseil des March,s Financiers, a self regulatory organisation that oversees market transactions, and the Commission Bancaire, the watchdog for the banking industry. The French government is a strong proponent of the so-called "twin heads" model of regulation-having one regulator for prudential supervision and wholesale business (the markets for financial products between professionals), and one for the retail markets, where financial products are sold to consumers. The head of the COB, Michel Prada, says that two separate regulatory bodies are preferable to one for two main reasons. In the first place, they reduce the risk of the retail market regulator being "contaminated" by its wholesale counterpart, and vice versa. And, secondly, they reduce the huge management burden that is imposed on a single regulator. The COB has fewer than 300 staff; the FSA has around 2,000. The EU'S bureaucrats have been pursuing reform for much longer than their national counterparts-and with little to show for it so far. In theory, EU financial markets were supposed to be one single market from the first day of 1993. (Remember the 1992 "single market" programme of directives?) At the time, many of the measures that were required to create a single market in financial services, together with more streamlined regulation, were put in place. Restrictions on capital movements had been largely dismantled, and the European Commission had launched a series of "passport" directives designed to let banks, insurers and stockbrokers offer their services directly across borders without setting up local subsidiaries. All was in place for the single market in financial services to take off. In practice, however, member states delayed the implementation of the directives, or did not implement the bits that they did not like. At first, the commission reacted timidly to their recalcitrance, setting up a feeble Forum of European Securities Commissions (FE5C0) in 1997 to promote co-operation among securities regulators. FESCO's work has been inconsequential though, largely because it does not have any official status. It is further handicapped by being obliged to work by consensus, and by being unable to make recommendations that are binding. In the aftermath of the launch of the euro, Europe's leaders decided to take more robust action to tackle other financial markets. They endorsed the European Commission's Financial Services Action Plan (FSAP) at their Lisbon summit in March 2000, a blueprint for integrated capital and financial-services markets across the EU. The F5AP recommends 42 measures to streamline the regulation of retail and wholesale financial markets. The latest deadline for their implementation is 2005. Not content with this deadline, nor with the contents of the plan, the French government decided to try both to tinker with it and to speed it up. In the second half of last year, when France held the presidency of the Council of Ministers, Laurent Fabius, the French finance minister, suggested setting up a small committee to study the possibility of a more radical plan. In it he wanted to include the establishment of a pan-European regulator to be headquartered (not surprisingly) in Paris. Britain was staunchly opposed to the setting up of such a committee and tried unsuccessfully to block it. To calm Britain's worries, a British treasury official, Sir Nigel Wicks, was made a member of the committee that was eventually formed under Mr. Lamfalussy's chairmanship. It produced an interim report last November and a final report in mid-February. Competing visions Despite all this activity, neither national governments nor policymakers in Brussels have made up their minds about the best form of financial regulation for Europe. Most EU member states now consider a single supervisor for all financial services to be the best solution within their own domain, although there are those who want to keep regulation of the wholesale market apart from regulation of the retail side. By the same token, a pan-European regulator would seem to be the most efficient way to put an end to Europe's regulatory ragbag. Yet the idea of competition between different jurisdictions offering their own brand of regulation has its supporters. While the French campaign for a single European regulator, Britain's chancellor of the exchequer, Gordon Brown, is fiercely opposed to the idea. The Germans are also in favour of a pan-European regulator, though they are less keen than the French. Caio Koch-Weser, a state secretary at the German finance ministry, has said that at some stage a pan-European regulator will be on the agenda. By reforming its regulatory set-up, his country is to "foreshadow" that development. Mr. Lamfalussy's group stops short of proposing a single regulator (or even "twin heads") for the whole of the EU-although its recommended creation of a securities committee to speed up the Eu's cumbersome legislative procedures has been seen by some as an embryonic SEC. "This is an open-ended process," says Mr. Lamfalussy. His committee's report has only proposed measures that it thinks can be implemented in the next few years. Mr. Lamfalussy is, he concedes, a federalist-but a pragmatic one. His group was not asked to come up with a counterproposal to the commission's FSAP. Rather, it was expected to highlight the most urgent measures needed to streamline the regulation of securities markets in the EU. Hence the group's final report focuses on the modernisation of rules for investment and pension funds, on the adoption of international accounting standards, and on a single "passport" for stockmarkets. Mr. Lamfalussy wants all these reforms implemented by 2003, although he admits it "will be tricky". Other priorities on the list are less controversial-a single prospectus for issuers; the principle of mutual recognition for wholesale markets; and the modernisation of exchanges' listing requirements. Ironically, many of the group's recommendations have been under discussion for years, or are in some cases already part of an EU directive. Many of these proposals, however, came out half-baked. The key investment-services directive, for instance, which sets conditions for a single EU-wide license for investment firms, and which empowers stock exchanges to operate across borders, was watered down and implemented belatedly. Although the directive was approved in 1992 (after three years of tortuous wrangling), many governments waited until 1996 to implement it. In order to get it approved at all, the commission had to tolerate many ambiguities in the text. For instance, something as basic as the definition of a professional investor is unclear. Mr. Lamfalussy makes much of the damage that has been done by the delays in tack ling what he calls "priority" measures. National governments still stick to protectionist investment rules for investment and pension funds, for example. The Italian government requires that pension funds invest a considerable portion of the money that they manage in government bonds. And multi national companies are obliged to run a different pension plan for their employees in each member state of the union. As a result, the average American investment fund is six times bigger than its European equivalent, and between 1984 and 1998 the average real return on pension funds was 10.5% in America and 6.3% in EU countries that impose strict restrictions. The people who suffer most from Europe's protectionist rules are pensioners themselves. And as more and more of them come to rely on private-sector schemes, their loss will be even greater. Mr. Lamfalussy is also concerned about the damage that is being done by the continuing failure of most EU member countries to introduce rules on disclosure comparable to American standards. This failure means that investors in the EU are not properly protected. For instance, information on the stock options granted to the directors of Lernout & Hauspie, a troubled Belgian company developing speech-recognition technology, could only be found at the SEC'S "EDGAR", an electronic register in America that gathers and analyses data on companies flies. Even the Belgian authorities that are investigating Lernout for allegedly inventing revenues had to turn to the SEC for help. Karel Lannoo at the Centre for European Policy Studies in Brussels is among those in favour of introducing a European EDGAR once the single European prospectus is a reality, and once EU accounting standards are more homogeneous. Almost stronger than the Lamfalussy committee's desire to give new impetus to proposals for reform that, in many cases, have been discussed for years, is its desire to accelerate decision-making procedures within the EU, and to control more tightly the implementation of directives by member states. At present, the commission makes a legislative proposal to the Council of Ministers and the European Parliament. They then shunt it around in a complex co-decision procedure that takes on average more than two years. The takeover directive has been in the works for 12 years (and has still not been adopted), while the European company statute has been discussed, on and off, for more than 30 years. Mr. Lamfalussy calls for a four-level approach to decision-making and the implementation of financial-market proposals. At the first level, the Council of Ministers, the -, European Commission and the European Parliament would agree on "framework" legislation and would decide which of the measures to be implemented should be passed to the next level. At this second level, a newly created "securities committee", made up of representatives of the commission and of member states, would reach agreement within three months on the technicalities of the new legislation. This they would do after consulting market participants and consumers. "The -government representatives on the securities committee should be just under the finance minister," says Mr. Lamfalussy. Predictably, the idea of such a committee has aroused the wrath of the European Parliament. It worries that the committee will be come a means for removing important decisions from democratic accountability. Levels three and four of the Lamfalussy approach to decision-making involve cooperation among national regulators via a "regulators' committee". Its purpose will be to improve the implementation of EU legislation by the better enforcement of EU rules. The timetable for the Lamfalussy plan is ambitious. It is to be debated by the European Parliament in mid-March, where it is unlikely to have a comfortable ride, and it will then come before the European Council at its meeting in Stockholm at the end of March. There, the list of priorities in the plan is due to get the community's stamp of approval. The commission is then to begin setting up the securities committee and the regulators' committee in April and May, and by December the two committees should be in operation. All Mr. Lamfalussy's recommendations are due to be implemented by 2004, -a year earlier than the deadline of the commission's own action plan. This is ambitious. Even if Mr. Lamfalussy's four-level approach is simpler than the Kafkaesque co decision procedure currently in place, it is still a complicated structure. Moreover, some of the measures on his priority list (such as the move to international accounting standards) are very likely to take more than two years to implement. The role of the regulator The debate about financial-market regulation in Europe has moved from considering the merits of self-regulation versus statutory regulation, to whether a single regulator should police all financial services. The Lamfalussy report has done nothing to help resolve this dilemma. Financial regulation exists for three main reasons. It is there to provide a safety net that will prevent the collapse of one bank, insurer or investment manager triggering the failure of others. It is also there to supervise the integrity of financial institutions and to protect individual consumers from malpractice and fraud. And it is there to act as the watchdog of financial markets, policing insider dealing, malpractice and other offences. If it is tricky for a single national authority to combine these different objectives of regulation, it is even harder for a supranational regulator. How can a single organisation hope to protect investors, police financial institutions, and watch markets in 15 different jurisdictions? Even if it were desirable to try, some form of common jurisdiction would be essential. On top of everything else, a regulator has to be firm and effective to gain credibility. If the EU'S track record in enforcing its directives on financial regulation is anything to go by, a pan European regulator would be neither. No taste for risk: Are markets rejecting their traditional role? Financial Times - March 6, 2001 By Philip Coggan The collapse of Barings, the Asian financial crisis of 1998, the dotcom mania of 1999-2000 - these events have created the idea that the financial markets are a Frankenstein's monster, wreaking havoc on the societies that created them. Not so, according to the author of this polemic. Far from being a giant casino, the financial system has become obsessed with controlling risk at the expense of fulfilling its proper function - providing capital for business. As a consequence "the era of financial growth has coincided with that of a secular economic slowdown". This is, at the very least, a refreshingly different take on the events of the past 25 years. The world, in the author's view, has too few risk-takers, not too many. And Mr. Ben-Ami assembles some solid building blocks for his case. He points out, quite rightly, that equity markets have been taken over by fund managers who are obsessed with the business risk of matching the index (and their peers) rather than achieving the maximum return. Banks have retreated from their function of providing risk capital to business in favour of the fee-earning function of arranging bond issues. The rise of the derivatives industry illustrates the extent to which companies and financial professionals have become obsessed with the aim of avoiding risk, whether it comes in the form of interest rate and currency movements or changes in the weather. Ben-Ami also points out that, in the US and the UK at least, stock markets have almost ceased to perform the function of providing capital to business. In net terms, capital has been returned to investors in the form of takeovers and share buy-backs. But just when you feel Mr. Ben-Ami has the basis of a good case, nagging doubts start to enter your mind. How is he going to deal with the rise of the venture capital industry? Or with the use of share options to motivate executives? Or with the growth of day trading? The answer is that he doesn't really address those issues. In fact, the case that the financial system is starving industry of funds has been made at various times over the last century but it has been extremely difficult to prove. It seems a particularly ropey argument when one considers the events of the last decade. Arguably, the financial system was ludicrously keen to fund anyone with a laptop and a new economy idea; the economy may now face a crisis of over-investment. There has been no shortage of funds for start-ups. The amount of money invested by US venture capital groups rose from Dollars 5bn in 1988 to Dollars 48bn in 1999. And established groups have had no problems raising capital either: international bond issuance in 2000 reached a record high of Dollars 1,430bn. Arguably the decline of government bond issuance (thanks to the improved finances of European and US governments) has freed capital for industry. It is also pretty hard to argue that risk-taking in society has declined when one recalls how many executives and employees have left established companies for dotcom start-ups over the last couple of years. Old economy businesses have also been happy to "gear up", taking on extra debt either through management buyouts or to increase the return on equity and satisfy the stock market. Individuals have also been happy to take on greater debt in the UK and the US and to put a greater proportion of savings into equities (albeit via collective schemes such as mutual funds). Neither development suggests a risk-averse culture. And, while enthusiasm for developments such as online trading and spread betting may be confined to a small minority, it still points to the existence of a strong gambling mentality. Arguably, the long bull market has blinded investors to the risks inherent in equity investment, rather than making them too cautious. It is also pretty hard, looking at the record of the US over the last five years, to say that economic growth has been sluggish. One can argue about some of the productivity statistics, and about the causes of the improvement, but the US has nevertheless grown faster, at a lower unemployment level and with scarcely any inflationary pressure, than most economists would have thought possible a few years ago. Mr. Ben-Ami's case might make more sense applied to Europe or the UK but the US is at the heart of financial market change; if this thesis doesn't work there, it doesn't work at all. In short, the author makes a much better case for the defence of the financial system than he does when attacking its pusillanimity. Scott Marra Administrator for Policy & Media Relations ISDA 600 Fifth Avenue Rockefeller Center - 27th floor New York, NY 10020 Phone: (212) 332-2578 Fax: (212) 332-1212 Email: smarra@isda.org