Financial reforms in America

A key proposal of Obama's Administration is to set up a Consumer Protection Agency on financial products. It will encourage financial institutions to offer "plain manilla" products that meet their needs.

Critics said that it will stifle innovation. I disagree with these critics. My view is that consumers are best served by buying simple products. They do not need "innovative" products, which were created to make profit for the financial institutions, at the expense of the unwary consumers.

Another interesting proposal is for the products to be offered on an exchange. For example, the Administration is working on a health insurance product to be offered by the Government, which will be offered on an internet exchange together with private sector products. This will allow the consumers can make an informed choice on the available products. In my view, this is a major step forward.

I read that Paul Vocker, who is an adviser to the Obama Administration, is strongly in favour of all derivative products being transacted on an exchange, rather than over the counter. This will ensure transparency and fair pricing. I agree with this approach. If it had been adopted earlier, the world would have avoided the global financial crisis.

Free market and innovation have been misused by the proponents to act unethically and to take big risks, which has caused the downfall of the global economy.

We need new foundations to rebuild the global economy, namely:
a) plain manilla products
b) transacted through an exchange
c) consumers to be protected

My best wishes for the success of the financial reform that is being promoted by the Obama Administration. They have the courage to do the right thing.

Tan Kin Lian