Politicians, regulators and financial specialists outside the United States are seeking a role in the oversight of American markets, banks and rating agencies in the wake of recent problems related to subprime mortgages.
Their argument is simple: The United States is exporting financial products, but losses to investors in other countries suggest that U.S. regulators are not properly monitoring the products or alerting investors to the risks.
“We need an international approach, and the United States needs to be part of it,” said Peter Bofinger, a member of the German government’s economics advisory board and a professor at the University of Wuerzburg.
While regulators in the United States have not been receptive to the idea in the past, analysts said that Europe and Asia have more leverage now. Washington might have to yield if it wants to succeed in imposing bilateral regulations on government-owned investment funds from emerging economies.
“America depends on the rest of the world to finance its debt,” Bofinger said. “If our institutions stopped buying their financial products, it would hurt.”
Half a dozen U.S. banking and financial regulators — including the Securities and Exchange Commission and the Federal Reserve Board — had no comment. Several noted that they were not the sole regulators of the subprime market.
In general, Washington’s reaction has been that it wants “no form of oversight,” said Kenneth Rogoff, an economics professor at Harvard and a former chief economist of the International Monetary Fund.
Banks and investment funds from China to France were hit with losses after buying mortgage-related securities and complex financial products based on them in the United States.
In many cases, investors were caught by surprise because American rating agencies had given the products top ratings, leading buyers to believe there was little risk. International investors are also asking why American lenders were allowed to give mortgages to homebuyers who could not repay them.
“In a globalized economy with hedge funds, leveraged buyouts and all these investment funds, we have to ask the question about more transparency,” said Claude Bebear, the chairman of the supervisory board of the insurance company AXA.