Paul Singer on regulation, Dodd-Frank and opacity

Courtesy of ZeroHedge, we have the following comments from Elliott Management's Paul Singer on regulation, the Dodd-Frank Act and on-going opacity in the banking system.

In his comments, Mr. Singer hits on many of the themes that are familiar to regular readers.  This is not surprising as Mr. Singer and your humble blogger used very similar reasoning to predict the financial crisis.

On regulation:

• Opaque, overleveraged and vulnerable Financial Institutions which need to be propped up by the implicit or explicit guarantee of sovereigns does not make for a solid financial plumbing system for the global economy...this is a formula for power entrenchment, favoritism and shady deals behind closed doors.

On Dodd-Frank:

• Not only will it fail to make the system safer, but we believe it will likely be an actual accelerant of the next financial crisis

• Dodd-Frank was supposed to “fix” the American financial system and end “too big to fail.” Unfortunately, the law, born in a political steamroller, does the exact opposite: it will be the accelerant of the next crisis.

• The 2008 crisis was episodic and took a while to get rolling. The next one could well be a black hole, and Dodd-Frank will bear responsibility for that.

On why Americans are angry:

• The government, lacking deep understanding of these firms, wants to pretend that their gigantic efforts (most notably Dodd-Frank) actually fixed the situation. But we believe that citizens are angry at what their guts tell them (correctly, basically) about the special treatment and riskiness of Financial Institutions.

On public data reporting:

• Decades ago, the balance sheets of the Financial Institutions contained most of the information you needed to know to understand their risks. Today the picture is profoundly different, predominantly due to the growth of leverage through derivatives....As a result, there is no major Financial Institution today whose financial statements provide a meaningful clue about the risks of the firm’s entire panoply of assets and liabilities including derivatives, nor how the firm’s performance, or even survival, will be affected by market movements in the future.