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LAAA Membership Benefits:
Are you a Member yet? 1. Market Information. 2. Networking 3. Education & Seminars. 4. Quality Presentations 5. Representation 6. Tradeshow 7. Monthly Meetings 8. Industry Recognition 9. Qualified Vendors. 20. Strong Leadership. 11. Meaningful Discounts. 12. Preferred Positioning.
LAAA Meeting Calendar
AGENDA / May 2011 05.19.2011 - Meeting L.A. Monthly Meeting Stevens Steak House Commerce, CA 05.25.2011 - Training Las Vegas Commercial 101 Training National Golf Course Las Vegas, NV 12.01.2011 - 12.04.2011 - Convention Convention and Christmas Gala Long Beach Reinassance Hotel Long Beach, CA
For up to date meeting info in your area, go to www.latinagents.com/calendar
L.A.A.A. P.O.Box 4564 Valley Village, CA 91617 (818) 635-4848 rafael@latinagents.com
www.latinagents.com
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AGENDA / May 2011
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WHO IS REGULATING THE LARGEST GLOBAL INSURANCE COMPANIES AND BANKS? Do These Financial Intermediaries Need Special Regulation and Oversight? Who will do it? By Stephen Santoro
Within the last six months, we at Andree
traffic to their websites. With each
& Associates had been working with
website we initially started with the
many different companies in building
goal of building better search engine
better websites and driving significant
rankings, by doing some website re-
design, search engine optimization and
review and pictures on your website.
other. Along the way we found many
Also print some flyers and hand them
different ways of driving traffic to their
over to help people remember your
websites as described below.
website address, if available create a
Hope they work for you, the way they
special offer, something like “Browse
have work for my company and different
the event pictures on our website after
clients.
X or Y date and get 15% discount on any product” will do the trick.
1.- Event Coverage: this is simple try attending events that are related to
The sub-prime and Alt-A mortgage
your customer niche. Basically narrow
bubble have caused HUGE havoc in
your audience, target groups of people
financial markets.
that have interests in certain things
shown other weak sectors in the credit
for example, Off-roading, insurance,
markets as a result. A recession can
lawyers,
car
be avoided, yet when compared with
racing, chamber of commerce meetings,
the robust economic expansion of the
or just business oriented groups. You
past years the correction that followed
can also narrow by county, city, state or
in 11.2007 seems like a recession
country depending on your advertising
nonetheless.
budged.
charge? Who is watching? What kind
So for example if you are targeting
of role should insurance and banking
people in the car racing area you would
regulators play to ensure this fiasco
need to participate in a car show, be a
never occurs again? And can they or
racing team sponsor, or just attend a
will they safeguard us against current
local car racing event. Take pictures and
and future turmoil? Should one federal
notes and publish them on your website
regulator manage global insurers in
so people can browse the pictures and
the USA instead of 51 individual state
comment on them.
regulators and the District of Columbia?
It’s very important to let people in the
The
event know that you will be posting a
Paulson, in concert with CITIGROUP,
computer
consultants,
US
The economy has
I must ask:
Treasury
Who is
Secretary
Henry
Bank of America, NT/SA and JP Morgan
The superfund neither resolves the core issue or mitigates the fundamental problems of the financial markets.
Chase, NT/SA proposed the creation of a “superfund” called the “Master Liquidity Enhancement Conduit”.
This fund
is designed to buy mortgage backed securities (MBS’s), collateralized debt obligations (CDO’s) and collateralized loan obligations (CLO’s) from structured
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AGENDA / May 2011 investments
vehicles
(SIV’s),
most
by informing member banks that credit
owned by CITIGROUP, BOA and JPM,
would be readily available, signaling
who had invested in prime, sub-prime
their help for allowing banks to make and
and Alt-A mortgages.
I don’t see the
meet the banks commitments-including
need for this “superfund”. The banks,
SIV demands on the banks credit lines.
insurance and reinsurance companies
Major European central banks served
involved who bought these securities
up HUGE cash reserves, frequently to
(many allegedly rated by S&P, WEISS and
mitigate stresses. The Bank of Japan,
Moody’s as AAA) still hold the capacity
which spoke of raising rates, abstained
to meet their lending commitments
(temporarily) from raising rates.
and risk-based capital requirements.
spite of these efforts by monetary and
Further, this superfund would acquire
insurance regulators, world markets
only better quality mortgages of these
remain stresses, shaking and very
SIV’s.
I doubt this would entice or
tense. Sub-prime and Alt-A mortgage
encourage commercial-paper holders
transaction volumes are virtually non-
of these SIV’s to continue to “roll over
existent.
their paper” or continue lending to these
and global financial institutions (banks,
SIV’s.
It appears the basic purpose
savings & loans, insurance companies
of this superfund is to only delay the
and reinsurance companies) fell sharply,
recognition of these losses, the accurate
many by 50%. Volatility was high. Key
and proper pricing and the resultant
commodity prices rose sharply. The US
write-offs and write-downs.
The
dollar continues to fall sharply. Some
superfund neither resolves the core issue
large countries are “de-linking” their
or mitigates the fundamental problems
currencies to the US dollar, something 1
of the financial markets.
year ago that was unheard of.
Another
In
Stock prices of most world
measure is for the Federal Reserve
The US Treasury, the Federal Reserve
Board of Governors aggressive easing
Board
of US monetary policy, by lowering the
Association of Insurance Commissioners
federal funds rate (the rate banks charge
and all State Insurance Regulators did not
each other) or the discount rate (the
come forward with solutions that limit
rate the Fed charges banks who borrow
future fiascos such as these bubbles
directly from it). The Fed has lowered
we just witnessed.
the federal funds rate and the discount
not upgraded their protocols to regulate
rate, while injecting large amounts of
the fundamental structural changes that
cash reserves into the world banking
have transformed markets in the recent
systems. The Fed, in concert with other
decade. In an age of transparency, these
countries central banks went further
global enterprises are really opaque.
of
Governors,
the
National
These folks have
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AGENDA / May 2011
This issue has created fears, doubts and
sector issues vs. lower quality issues
mistrust about the underlying strength
for which pricing is done off models
of the markets and these institutions. A
or some computer generate “matrix”.
decade ago financial markets were not
Fed Chairman Bernanke was asked
this complex. Today the are magnitudes
once what information he would like
larger, and filled with complex, new and
that is not currently available to him.
arcane instruments. Risk taking-driven
His answer, “I would like to know what
by quantitative (quant) models has
these MBS’s, CDO’s and CLO’s are really
become much more aggressive with
worth.
greater scale. These structural changes,
and Alt-A mortgages) has revealed a
many if not most initiated in the USA, are
HUGE weakness in structured credit
gaining acceptance in ALL major world
products.”
financial centers.
Giant financial intermediaries (banks,
We have created a
This episode (with sub-prime
highly securitized financial world that
s&l’s,
works well only if securities are priced
companies) have all contributed this
CORRECTLY and not “marked to myth”.
opaque environment in financial markets.
Weaknesses and failures in securities
Their activities span many sectors
pricing, as we have seen, wreaked havoc
from consumers to business, trading
in all markets. Investors, including me,
to investing, securities underwriting
have learned the “hard way” that not all
to
assets are the same as to pricing, even if
trading,
rated investment grade AAA. There is a
underwriting,
HUGE difference to “marking to market”
from managing billions of consumer or
value US government securities and
institutional dollars to consulting and
agencies or large high-quality private-
advising. These firms global presence
insurance
lending,
and
proprietary
insurance
reinsurance
(program)
and
reinsurance
real-estate
brokerage,
grows briskly every day, with many now garnering most of their profits from
How can these folks encourage economic growth, while at the same time restraining financial markets within proper limits?
markets outside of the USA. Their sheer size, scope, scale and reach in financial markets worldwide is impossible to decipher from their published financial statements. Their reach is so vast and deep these behemoths are “deemed to large to fail”. Who or what can provide financial oversight, supervision and regulation THAT IS CURRENT, UP TO DATE AND
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AGENDA / May 2011 AS SOPHISTICATED AS THEY ARE?
What is urgently needed is a new kind
Today’s regulatory environment is a
of regulator. This body will oversee the
historical artifact from an era when
largest US-based financial institutions,
financial markets and companies were
banks, s&l’s, insurance companies and
much more fragmented and insulated
reinsurance companies, who engage in
from each other. US state and federal
a broad on and off balance sheet activity
regulators for various markets continue
I noted previously in this article. This
to oversee specific activities in financial
authority would monitor and supervise
markets.
The elimination of “Chinese
these behemoths, assessing capital
walls” that once separate securities
adequacy, loss reserves, soundness
brokerage,
of
commercial
banking,
their
trading,
underwriting
and
personal banking, investment banking,
investment practices, their vulnerability
mutual funds, hedge funds, insurance,
to conflicts of interest, measure their
reinsurance and other businesses has
stability and soundness, and make
made fragmented state and federal
certain of their competitiveness.
regulation obsolete. The Federal Reserve
am
System and the National Association
supervision of most or all financial
of Insurance Commissioners (NAIC)
institutions. I do propose this oversight
comes close to performing the role of
for the 20 largest and some who wish to
“global financial guardian”. Their central
be regulated as such, through this highly
missions are to implement policy (keep in
sophisticated
mind the NAIC is a “quasi-governmental
fill the much-needed regulatory void,
entity, whose strength comes from the
given the vast reach of these dominant
50 states and the District of Columbia’s
players.
Insurance
in the USA have combined assets of
encourage
Commissioners) and
sustain
that
will
economic
not
advocating
I
comprehensive
regulator
that
would
The 15 largest institutions
$13 trillion.
They dominate all areas
But these tactics do not
of underwriting, trading, investment
always work in concert with each. In
management, claims adjudication and
fact they often work against each other.
financial management.
Officials acknowledge what to do when
command an overwhelming position in
a financial bubbles burst, yet they lack
derivatives and in many of the esoteric
the analytical capacity to identify a credit
financial derivatives that have grown
bubble in the making. How can these
so rapidly in the past 5-10 years. For
folks encourage economic growth, while
many smaller institutions the current
at the same time restraining financial
regulatory and supervisory authorities
markets within proper limits?
should remain the same.
growth.
These firms
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AGENDA / May 2011
I suggest this new entity be under the
regulation.
A federal charter was
joint supervision of the Federal Reserve
discussed, with the insurance company
Board or Governors and the NAIC, due
or reinsurance company having the
to their collective insights into market
option of how it is regulated. I favored
development and innovation. This new
this option and champion it today.
authority should report to Congress
now believe the same is necessary
annually. In light of current and future
for all financial intermediaries as I
globalization, other leading economies
describe above. Oversight by regulators
of the world should consider a similar
must align with the rapidly unfolding
or joint approach.
Here too, few
developments in domestic and global
institutions would come under their
financial markets. If we do not do this,
supervision, jurisdiction and regulation
the sub-prime and Alt-A mortgage crisis
in Europe, Canada, Asia and Australia.
will be nothing compared to what can
For the past 5 years many have asked
happen to our credit, banking, insurance
for an alternative to state insurance
and reinsurance markets.
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AGENDA / May 2011
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Together, we’ll make a difference. As we join you in celebrating Cinco de Mayo, we’d like to express our continued commitment to bilingual services and culturally responsible care. We look forward to working together to improve health care in the community. For more information, visit kp.org/espanol, or contact Carmen Salcido at carmen.p.salcido@kp.org or 562-833-0197.
kp.org
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AGENDA / May 2011
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RELAX & THINK
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