Local view for "http://purl.org/linkedpolitics/eu/plenary/2007-09-05-Speech-3-203"
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"en.20070905.21.3-203"2
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"Mr President, the process of sub-prime lending has definitely been a huge problem causing the financial turbulence which we have witnessed this summer. That was clear, but what is less clear is the identification of investors and counterparties which may be, and continue to be, under stress, and that identity is absolutely vital for us to clear up.
This is due by and large, as we have heard today, to the sophistication of financial instruments which are viewed by some as akin to alchemy. However, we need to take a careful and cautious look at what to do about these and the effects that have been caused by that turbulence. Over-reaction may be equally as damaging as what has already occurred, as we find the price of credit rising as a result. This is not good for the Lisbon Process, we should be reminded.
So what has actually happened in the USA to close the door on some of these issues? It might be said that the barn door has just been closed when the horse is in the field, and that would be true to say. However, largely speaking, the sub-prime mortgage lending area was unregulated. That is a fact now which has been addressed very directly as industrial regulatory and legislative initiatives, I am told, are under way. At the same time, a high level working group has been set up under the auspices of the White House to look at credit rating agencies and sophisticated financial vehicles.
What we can draw from that is that it is vital to work closely with the United States and other global markets as we share the same conclusions about the transparency in these markets. If we do not, because the global markets are intertwined so closely, we will stand to lose so much of the benefit that could be added by the conclusions which we would have to share.
What has happened within the EU and what has happened within the US? I share some confidence now in the Commission, and of course with the ECB as well as with the Federal Reserve in the United States, in what they have done. They have helped to settle down the markets, which was exactly what we needed to do.
I can agree, however, with some of the speakers here today on calling for proportionate responses and I can maintain that in the sense of the confidence that I have. I believe that the securitisation and special purpose vehicles, which will be under scrutiny along with the credit rating agencies, do need to be opened up to greater scrutiny and transparency, that is clear, as Ms Berès has already said. But let us be clear that the sophistication of financial instruments is difficult for many of us to understand, and the role of credit rating agencies is open."@en1
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