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Geithner warns of rift with EU over regulation

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Geithner warns of rift with EU over regulation

By Martin Arnold and Sam Jones in London and Nikki Tait in Brussels

Published: March 10 2010 20:50 | Last updated: March 10 2010 20:50

Tim Geithner, US Treasury secretary, has delivered a blunt warning to the European Commission that its plans to regulate the hedge fund and private equity industries could cause a transatlantic rift by discriminating against US groups.

A letter sent by Mr Geithner this month to Michel Barnier, Europe’s internal market commissioner, makes it clear that the European Union is heading for a clash with Washington if it pushes ahead with what the US – and Britain – fear could be a protectionist law.

The debate over the shape of future financial regulation has reached a critical point in Brussels. Diplomats were on Wednesday night moving closer to a compromise on the sweeping overhaul that has angered the industry and worried institutional investors.

The draft EU directive would impose tighter restrictions on hedge funds, private equity and other alternative investment funds. It has caused alarm in the City of London, where some in the industry say it is a thinly veiled attempt by France and Germany to undermine the UK’s dominance of financial services.

If European diplomats reach agreement at a meeting on Thursday, the directive will be put to EU finance ministers when they convene on Tuesday. The proposed rules will require approval by EU lawmakers.

Mr Geithner’s one-page letter, sent on March 1, stresses the need for the US and Europe to work together on regulation of the financial services industry.

He underlines last autumn’s commitment by the Group of 20 nations to avoid discriminatory measures in any regulatory response to the financial crisis.

Mr Geithner warns that US hedge funds, private equity groups and banks could be discriminated against if proposals to restrict the access of EU investors to funds based outside the 27-country bloc are included in the final law.

So-called “third country” elements of the directive would force non-EU funds to comply with the new rules if they wish to market themselves at all within the EU. The directive could also force EU-based private equity and hedge funds to use only locally based banks as custodians and depositaries.

Contentious areas also include rules on remuneration, limits on borrowing, the disclosure of sensitive information and the regime for depositaries.

Paul Myners, UK financial services minister, told a meeting of private equity executives on Wednesday that he would fight “line by line and minute by minute” to defend the free movement of capital. But he also warned that “nobody in this room is going to get the directive they want”.

One senior private equity executive said the UK needed to take a stand before others would rally behind it.

http://www.ft.com/cms/s/0/e0990432-2c83-11df-be45-00144feabdc0.html?nclick_check=1

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A letter sent by Mr Geithner this month to Michel Barnier, Europe’s internal market commissioner, makes it clear that the European Union is heading for a clash with Washington if it pushes ahead with what the US – and Britain – fear could be a protectionist law.

The debate over the shape of future financial regulation has reached a critical point in Brussels. Diplomats were on Wednesday night moving closer to a compromise on the sweeping overhaul that has angered the industry and worried institutional investors.

Mr Geithner warns that US hedge funds, private equity groups and banks could be discriminated against if proposals to restrict the access of EU investors to funds based outside the 27-country bloc are included in the final law.

So-called “third country” elements of the directive would force non-EU funds to comply with the new rules if they wish to market themselves at all within the EU. The directive could also force EU-based private equity and hedge funds to use only locally based banks as custodians and depositaries.

Contentious areas also include rules on remuneration, limits on borrowing, the disclosure of sensitive information and the regime for depositaries.

Hah!

A whole new ball game!!

Imagine when we write the history of this event, that we hear about the protectionist laws that were implemented in the "finance" industry.

If ever such an industry ever really existed.

What a mad world we now live in, where banks (repositories for money), believe and think that they are an industry!!!

That they actually create something, rather than providing the means for others to create something.

Sorry, I don't have any sympathy whatsoever.

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Hah!

A whole new ball game!!

Imagine when we write the history of this event, that we hear about the protectionist laws that were implemented in the "finance" industry.

If ever such an industry ever really existed.

What a mad world we now live in, where banks (repositories for money), believe and think that they are an industry!!!

That they actually create something, rather than providing the means for others to create something.

Sorry, I don't have any sympathy whatsoever.

I probably need to quantify that statement.

I have no sympathy for those who engineered the current crisis, from now being able to dictate the rules to others.

I have no sympathy for those who have happily enjoyed massive bonuses from their heady days of being in control of the world finances.

Now that they themselves are effectively finding themselves locked out of the game.

I know that individual persons are involved, but I'm probably thinking more broadly than just individual bankers.

I'm not sure why, but I couldn't edit the previous post. Edited by Solomon

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Hah!

A whole new ball game!!

Yep, the Fed and US Treasury are riddled with Wall St cronies. Forget Chomsky's military-industrial complex, this financial-governmental complex beats it hands down with the power of unregulated attacks on foreign economies and currencies. The last thing they want is any regulation/transparency/sanity crimping their actions.

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The Europeans must be shaking in their boots. I think they are more worried about keeping energy flowing from Russia and products flowing to non-Americans who can afford them. I know from my exposure to Germany that people's concerns are strictly limited to a job in hand, money in the wallet, food on the table and a roof over the head.

I almost feel like we are already in World War III and it is executed via goods, services, currencies and number flows on computer screens. Who needs bombs when you can take down a country with a short position and media campaign?!?

Edited by sydney3000

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