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The Future of Financial Regulation

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"The Future of Financial Services”, organized by Capco and NYU-Poly

Presenter: Allen Ferrell
Greenfield Professor of Securities Law
Harvard Law School

June 16, 2011

Published in: Business, Economy & Finance
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The Future of Financial Regulation

  1. 1. The Future of Financial RegulationThe Post Crisis World of Finance Conference June 16, 2011 Allen Ferrell Greenfield Professor of Securities Law Harvard Law School 1
  2. 2. ABX Index ABX.HEAAA Closing Prices since Jan 2007110.000105.000100.000 95.000 90.000 85.000 80.000 75.000 70.000 65.000 60.000 55.000 50.000 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 8 8 8 8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 2 / 5 8 / 2 8 / 2 5 / 9 3 / 7 1 4 8 2 6 9 / 3 6 / 0 4 / 8 1 / 5 9 3 7 0 4 7 / 1 2 / 2 2 / 3 2 / 4 1 / 5 1 / 3 / 1 / 2 / 1 / 2 / 8 2 / 9 2 / 0 1 / 1 1 / 2 / 1 / 2 / 1 / 2 / 2 2 / 1 2 3 4 5 5 6 6 7 7 8 9 1 0 1 1 1 2 2 1 1 2 1 1 1 1 1 2006-1 AAA 2006-2 AAA 2007-1 AAA 2007-2 AAA 2
  3. 3. CDS Spreads Broker CDS Spreads 450 400 350 300 250 d a e r p S200 150 100 50 0 7 7 7 7 7 7 7 7 7 7 7 7 8 8 8 8 8 8 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 0 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 / 1 2 3 4 5 6 7 8 9 0 1 2 1 2 3 4 5 6 1 1 1 Date Lehman Brothers Merrill Lynch Morgan Stanley Citigroup Goldman Sachs JPMorgan ChaseSource:[1] Bloomberg 3
  4. 4. Housing Sales Data Ye a r-O v e r-Ye a r P e r c e n t C h a n g e in E x istin g S in g le -F a m ily H o m e S a le s 1969 - 20086 0 .0 0 %4 0 .0 0 %2 0 .0 0 % 0 .0 0 %-2 0 .0 0 %-4 0 .0 0 %-6 0 .0 0 % 9 9 0 1 2 3 4 5 6 7 8 9 0 0 1 2 3 4 5 6 7 8 9 0 1 1 2 3 4 5 6 7 8 9 0 1 2 2 3 4 5 6 7 8 6 - 6 - 7 - 7 - 7 - 7 - 7 - 7 - 7 - 7 - 7 - 7 - 8 - 8 - 8 - 8 - 8 - 8 - 8 - 8 - 8 - 8 - 8 - 9 - 9 - 9 - 9 - 9 - 9 - 9 - 9 - 9 - 9 - 9 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - n c v t p g l n y r r b n c v t p g l n y r r b n c v t p g l n y r r b n c v t p g l n a e o c e u u J u a p a e a e o c e u u J u a p a e a e o c e u u J u a p a e a e o c e u u J u J D N O S A J A M F J D N O S A J A M F J D N O S A J A M F J D N O S A J M M M A c t u a l S a le s % P re d ic t e d S a le s % 4
  5. 5. Housing Futures Historical CME Housing Futures ‐ Compsite Index225220215210205200195190185180175170 Aug‐06 Oct‐06 Dec‐06 Feb‐07 Apr‐07 Jun‐07 Aug‐07 Oct‐07 Dec‐07 Feb‐08 Apr‐08 Aug‐07 Nov‐07 Feb‐08 May‐08 Aug‐08 5
  6. 6. Housing Prices Year-Over-Year Change in Monthly Housing Prices January 1969 - September 2008 20% Statistically Significant Price Change 15% 10% 5% 0% -5% -10% -15% 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 6 7 7 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2Note: Housing prices are a weighted average of the prices of Northeast (22%), Midwest (22%), West (28%), and South (28%).Source: Housing prices used are Median Existing Single Family Home Prices retrieved from National Association of Realtors. 6

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