Identifier
Created
Classification
Origin
08SAOPAULO487
2008-09-18 11:09:00
UNCLASSIFIED
Consulate Sao Paulo
how-toVZCZCXYZ0000 OO RUEHWEB DE RUEHSO #0487 2621109 ZNR UUUUU ZZH O 181109Z SEP 08 FM AMCONSUL SAO PAULO TO RUEHC/SECSTATE WASHDC IMMEDIATE 8523 INFO RHEHNSC/NATIONAL SECURITY COUNCIL WASHDC IMMEDIATE RUEHBR/AMEMBASSY BRASILIA PRIORITY 9655 RUEHRI/AMCONSUL RIO DE JANEIRO PRIORITY 8852 RUCPDOC/USDOC WASHDC 3174
UNCLAS SAO PAULO 000487
SIPDIS
STATE INR/R/MR; IIP/R/MR; WHA/PD
DEPT PASS USTR
USDOC 4322/MAC/OLAC/JAFEE
E.O. 12958: N/A
TAGS: KMDR OPRC OIIP ETRD XM XR BR
SUBJECT: GLOBAL ECONOMY
UNCLAS SAO PAULO 000487
SIPDIS
STATE INR/R/MR; IIP/R/MR; WHA/PD
DEPT PASS USTR
USDOC 4322/MAC/OLAC/JAFEE
E.O. 12958: N/A
TAGS: KMDR OPRC OIIP ETRD XM XR BR
SUBJECT: GLOBAL ECONOMY
1.The Bubble of Omission
Lead editorial in center-right O Estado de S. Paulo (09/18) says:
"The U.S. authorities permitted the bankruptcy of Lehman Brothers, a
major investment bank, and several small banks, but refused to watch
passively, in the name of principles, the collapse of an institution
such as AIG, capable of carrying with it several smaller financiers.
At this point, it is useless to discuss whether the moral hazard
concept is valid only in certain situations and whether the
government, after all, will be willing to rescue badly administered
companies if their bankruptcy were capable of causing major damage
to the system. .. According to the doctrine, capitalism is a system
of risks and everyone should pay for his mistakes and the government
should never, by its intervention, stimulate irresponsible action.
But how can one not intervene, when the damages may affect the whole
system? ... The present situation, however, is not only a result of
uncontrolled factors, but mainly of factors not controlled because
of a political decision. By not having foreseen the risks, the
authorities now improvise solutions, unable of re-establishing the
security for more than a few hours or days."
2.Regulation, the key word in the global financial crisis
Editorial in economic newspaper Valor Economico (09/18) comments:
"One of the many lessons to be learnt from the world financial
crisis is the urgent need to re-think the role and extent of market
regulation, especially in times of globalization such as today. For
years, specialists in international finance and representatives of
the banking system publicly defended the thesis that less regulation
in the sector, following the recent American model, would benefit
Brazil a lot by favoring credit expansion, the essential fuel for
the accelerated economic growth so much desired by the country in
recent decades.... What we can affirm from this scene of bankruptcy
of traditional U.S. investments banks and billion-dollar
intervention by central banks ... is that there were terrible flaws
in the evaluation and implementation of regulatory norms in certain
segments of the U.S. credit system, which now serve as an alert for
other government leaders."
White
SIPDIS
STATE INR/R/MR; IIP/R/MR; WHA/PD
DEPT PASS USTR
USDOC 4322/MAC/OLAC/JAFEE
E.O. 12958: N/A
TAGS: KMDR OPRC OIIP ETRD XM XR BR
SUBJECT: GLOBAL ECONOMY
1.The Bubble of Omission
Lead editorial in center-right O Estado de S. Paulo (09/18) says:
"The U.S. authorities permitted the bankruptcy of Lehman Brothers, a
major investment bank, and several small banks, but refused to watch
passively, in the name of principles, the collapse of an institution
such as AIG, capable of carrying with it several smaller financiers.
At this point, it is useless to discuss whether the moral hazard
concept is valid only in certain situations and whether the
government, after all, will be willing to rescue badly administered
companies if their bankruptcy were capable of causing major damage
to the system. .. According to the doctrine, capitalism is a system
of risks and everyone should pay for his mistakes and the government
should never, by its intervention, stimulate irresponsible action.
But how can one not intervene, when the damages may affect the whole
system? ... The present situation, however, is not only a result of
uncontrolled factors, but mainly of factors not controlled because
of a political decision. By not having foreseen the risks, the
authorities now improvise solutions, unable of re-establishing the
security for more than a few hours or days."
2.Regulation, the key word in the global financial crisis
Editorial in economic newspaper Valor Economico (09/18) comments:
"One of the many lessons to be learnt from the world financial
crisis is the urgent need to re-think the role and extent of market
regulation, especially in times of globalization such as today. For
years, specialists in international finance and representatives of
the banking system publicly defended the thesis that less regulation
in the sector, following the recent American model, would benefit
Brazil a lot by favoring credit expansion, the essential fuel for
the accelerated economic growth so much desired by the country in
recent decades.... What we can affirm from this scene of bankruptcy
of traditional U.S. investments banks and billion-dollar
intervention by central banks ... is that there were terrible flaws
in the evaluation and implementation of regulatory norms in certain
segments of the U.S. credit system, which now serve as an alert for
other government leaders."
White