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By Michael Blair QC, George Walker, and Stuart Willey

Almost every day has brought a fresh story about investment markets, their strengths and weaknesses. Misreporting of data for calculation of LIBOR, money laundering with a whiff of Central American drugs trading, costly malfunctioning of programme trading mechanisms which brought the trading company to its knees, reputational damage inflicted by as yet unsubstantiated accusations of illicit financing in breach of international sanctions… the list goes on and on.

Toronto Financial District. Photo by Alessio Bragadini, 23 June 2009. Creative Commons License.

The list of problems, for firms, and in some cases for their customers as well, prompts some reflections about the role of investment markets in our society and about the relationship between markets and their regulation. Some years ago, in the latter part of the last century, it was fashionable for academics and practitioners alike to put their trust in the strength and reliability of market mechanisms. The experience in earlier decades of the hard discipline of the money markets no doubt added to this. For example the humiliation of the forced departure of the United Kingdom from the former European Monetary mechanism (EMU) in the 1980s reinforced the beliefs of many in the power of the markets as a way of finding and pricing out inefficiency and restoring a new equilibrium at a different point on the scale.

To the majority, therefore, the proper role of regulation at that time was essentially limited to cases of market failure. Most of the work in the public interest could be done by the markets themselves. They might, of course, need some help from the regulators to ensure proper disclosure, with a view to sufficient, and non-discriminatory, access by market users and commentators to market information. But if there was “sunlight” in the market, then that more or less guaranteed the “hygiene” of its mechanisms. From that concept came “light touch” as a means of describing a system of financial regulation that basically left it to well informed markets to function for themselves.

Not all agreed at the time with this general approach. There were honourable exceptions, whose only consolation since has been the (frequently best left unsaid) phrase “I told you so at the time”.

How things have changed since then! A rapid U-turn in public and political thinking has brought demands for sterner and more intrusive regulation. The insidiousness of human greed and of lack of foresight is now widely recognised and needs to be restrained. The market economists now accept that there is a real, and central, role for discipline, including both its punitive and its deterrent aspects as well as the benefits it brings in excluding the dangerous from the playing field altogether. The change has even led our politicians to embark on structural change to restore a previous splitting of retail regulation from the upper reaches of financial services. The case for this change has been based on a hope of better focus of the two new bodies on the two sectors, though the underlying motive appears more to be a desire to change something simply because it is thought to have failed.

Splitting in the public interest also seems likely to be required in the major banks as well. The “Vickers” reforms look set to require the banking industry to function in two separate ways, with required distance between the investment banking arms and the general consumer-based borrowing and lending functions.

Another consequence is that “enforcement” is once more central to the world of regulation, rather than seen as a stick kept, as far as was possible, in the cupboard for occasional use only in the most serious circumstances.

We have now arrived at a new post-crisis period of great challenge but also of potential opportunity. We seem to be set for a number of difficult coming years, during which the markets will be dominated and constrained by austerity, continuing uncertainty and risks of instability. But markets and economies tend to recover over time. We must hope that the politicians, central banks and regulatory authorities have learned all of the necessary lessons from the recent crises to prevent instability or, at least, better to manage and contain the risks of it.

Michael Blair QC, Professor George Walker, and Stuart Willey are the editors of the new edition of Financial Markets and Exchanges Law. Michael Blair QC is in independent practice at the Bar of England and Wales specialising in financial services. Previously General Counsel to the Board of the Financial Services Authority. Queen’s Counsel honoris causa 1996. George Walker is Professor in International Financial Law at School of Law, Queen Mary University of London and is a member of the Centre for Commercial Law Studies (CCLS). He is also a Barrister and Member of the Honourable Society of Inner Temple in London. Stuart Willey is Counsel and Head of the Regulatory Practice in the Banking & Capital Markets group of White & Case in London. Stuart specializes in financial regulation focusing on the securities markets, banking and insurance.

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The post Understanding and respecting markets appeared first on OUPblog.

I know our American friends were busy casting their vote yesterday, deciding who is to be the next President of the USA, but here’s something else very important indeed you can vote for. OK, perhaps not quite as important as deciding who is going to be the most powerful elected leader in the world, but hey, I’m British. I was feeling left out.

What we’re asking you to vote for, though, are the words you love to hate from 2008. Susie Dent has revealed the UK word of the year already but is there a word that has been everywhere that you would quite happily never see again?

We’ve made a few suggestions, but you can also nominate some words of your own. The survey closes on December 15th 2008, and all entries will be put into a prize draw. One lucky winner will receive a copy of Susie’s book Words of the Year.

Our suggestions are:

CREDIT CRUNCH - a multi-purpose word used to mean anything relating to the current financial turmoil

DELEAVERAGING - an opaque word to most, meaning the reduction of borrowed capital used to increase the return of an investment

MEDALLING - used at the Olympics, a curious example of a ‘verbed’ noun, from the word medal

FREEMALE - a manufactured word coined by a marketing company to mean a single woman

VISUACY - a word blend used as shorthand for ‘visual literacy’

Drum roll please! Today sees the announcement of OUP UK’s Word of the Year, as chosen by Countdown’s Susie Dent. And, perhaps unsurprisingly given what is going on in the world’s economy at the moment, that word is credit crunch.

‘The world’s financial markets have been one of the biggest generators of vocabulary in the past year,’ says Susie, who is also the author of a new book for OUP, Words of the Year. ‘Specialized vocabulary is now firmly on the British public’s radar. As fears of a recession escalate, it may be productivity of the linguistic kind that is the safest bet. Credit crunch is an example of an established term – it was already in currency back in the 1960s – being resurrected as circumstances change’.

In addition to the now familiar financial terms such as Ninja loans, stagflation, funts or jingle mail, Words of the Year also looks at expressions from other areas of our lives – including online social networking, ethical living, and the world of styling - that have been ‘bubbling under’ in 2008.

It was a year when the traditional Olympic torch-bearers had to become flame attendents, when run-off - first recorded in the Oxford English Dictionary from 1873 - became synonymous with events in Zimbabwe, when Google increased its linguistic dominance thanks to our quest for Googleability, and the newer moofer (and acronym for a movile out-of-office worker) and scuppie (an acronym for a ’socially conscious upwardly-mobile person/urban professional’) came to reflect our modern working lives.

But ultimately, 2008 is shaping up the be the year of the credit crunch, and so here’s your handy guide to just some of the entries in the 2008 bank of credit crunch Words of the Year:

NINJA LOAN – a loan or mortgage made to someone who has ‘No Income, No Job, No Assets’

JINGLE MAIL – the practice of sending back one’s house keys to the mortgage company because of negative equity, or the inability to keep up with payments

IPOD – acronym for ‘insecure, pressured, overtaxed, and debt-ridden’

HOMEDEBTOR – homeowner with a very large mortgage, particularly one that they are unlikely to ever pay off

SPEED MENTORING – a style of career- or life-coaching modelled on speed dating, in which each participant has a few minutes to seek advice on career-related questions

FUNT – someone who is Financially UNTouchable

EXPLODING ARM – variable rate mortgage with rates that soon rise beyond a borrower’s ability to pay

GOING UNDERWATER – falling into negative equity

STAGFLATION – stagnant growth and rising inflation

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Rebecca said, on 9/26/2008 10:38:00 AM

Happy Birthday George Gershwin!

Ashley said, on 9/29/2008 7:28:00 AM

A look at how daily food records can help you overcome your eating disorder.

Rebecca said, on 9/29/2008 10:23:00 AM

We celebrate Rosh Hashanah with Howard Schwartz.

Rebecca said, on 9/29/2008 11:35:00 AM

Elvin Lim takes a look at the charge that Obama doesn't understand.

Justin said, on 9/30/2008 7:46:00 AM

Some proverbial advice for bloggers.

Rebecca said, on 9/30/2008 12:08:00 PM

Norway

Coordinates: 63 0 N 11 0 E

Population: 4,611,000 (2006 est.)

Thanks to Sarah Palin’s Vice Presidential nomination, moose have been appearing in the US news quite a bit more than usual. In Scandinavia however—particularly Norway—the largest member of the deer family frequently makes headlines and generates an equally large amount of money for the Nordic country; one estimate puts the value of this year’s meat yield alone at $60 million. For a nation that imported over $5 billion in food last year, this is no small sum. The 5-week hunting season in Norway began last Thursday and will likely result in a lessening of the population by about 35,000 animals. Besides the monetary benefit to sportsmen (and women), this annual culling means safer highways and railroads for Norwegians, and, some would argue, a cleaner atmosphere for the rest of us.

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Ben Keene is the editor of Oxford Atlas of the World. Check out some of his previous places of the week.

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Kirsty said, on 10/1/2008 3:00:00 AM

One of my personal favourite new releases this season in the UK is the paperback edition of The New Oxford Book of Literary Anecdotes by John Gross. I could have chosen any one of hundreds of great anecdotes from and about authors I love, but in the end I decided to share with you this [...]

Kirsty said, on 10/1/2008 3:01:00 AM

'Credit crunch' is OUP UK's Word of the Year.

Ashley said, on 10/1/2008 7:24:00 AM

Ashley- Intern

Heroes, Lovers, and Others: The Story of Latinos in Hollywood by Clara E. Rodríguez recounts the stories of Latino actors and actresses from the era of silent film to the present day. Rodríguez, a Professor of Sociology and Anthropology at Fordham University, examines the social conditions and assumptions that influenced the portrayal of Latinos in American film and their reception by the public. In the following excerpt from Rodríguez’ book, we learn about the typecasting of Latino actors, and specifically, about the role of the “Latin Lover.”

Options for Latinos

With a few important exceptions, many of the films that featured Latino characters during this [cold war] era focused on social problems and were steeped in historical myths, machismo, or stereotypes of Latin lovers and Latina bombshells. (Indeed, strong female stars of all backgrounds were also shunted aside during this era.) The choices for Latino actors were generally limited: They could either Europeanize their images (by discarding any ethnic references) or play up the stereotypes. Consequently, in this period, the distinction between visible and invisible Latino actors became stronger, and invisibility became a more clear-cut strategy for navigating identity and careers. The absence of middle-ground positions in film reflected the intolerance for ambiguity characteristic of this era. The roles available often called for proverbial characters: victims incapable of defending themselves, vixens, alien invaders, and young punks. In essence, fewer roles were open to Latino actors, and of the few that were available many were mere clichés. Some actors also became victims of the McCarthyism that was emblematic of the times.

Latin Lovers, Bombshells, Spitfires, and Sultry Latinas

Some might wonder why being seen as a Latin lover, or a Latina bombshell, is problematic. What is so wrong with this? First, it should be made clear that in Hollywood movies at the time there was not much distinction (other than the obvious) between Latin lovers, bombshells, spitfires, and sultry Latinas; the difference was often merely a matter of degree or gender. It should also be made clear that Latin lover and Latina bombshell characterizations were in many ways desirable. They were the men and women that audiences yearned to touch, lusted after, the ones their mothers had warned them about; they made their viewers’ hearts skip a beat and promised rapture and full surrender. What was wrong with being projected as sexually desirable? Don’t most of us strive for this in one way or another or at one time or another?

The problem was that, in the case of Latinos, the characters were erotic and exotic, and little else. The dark, forbidden, dream lovers generally had no other role; they were not lucky in love, and they frequently preferred non-Latinos as partners. The characters were often morally inferior and ended up reinforcing the comfortable American status quo that relegated people like them to the back seat. True, the Latino characters inspired unspeakable desire and desirability, especially at this time, when non-Latin men and women were often portrayed as prim, clumsy, restrained sexual partners. In the end, however, once the escapist fantasy had subsided, it was the non-Latinos who had the good morals, sense, and intelligence and were “the real thing”—the ones to be taken seriously in marriage, as well as in other areas of life.

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Rebecca said, on 10/1/2008 11:05:00 AM

Anatoly Liberman looks at the word "hello".