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Wall Street in Davos – Days 3 and 4

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Modern Money

A roundup of all the best financial news and analysis from Days 3 and 4 of the World Economic Forum Annual Meeting in Davos, Switzerland.

Central bankers tout improved financial regulatory oversight: Featuring the leaders of the Bank of Japan, Bank of England, European Central Bank and International Monetary Fund, the “Global Economic Outlook 2014” panel was the power session from Friday’s agenda. IMF Managing Director Christine Lagarde and Wolfgang Schäuble, Federal Minister of Finance of Germany, touted the importance of financial regulatory reform efforts underway around the world. ECB President Mario Draghi shed light on the value of upcoming stress tests for European banks. ““Our most important objective is to shed light on what is in the banks’ balance sheets, which should be done in an operationally effective and completely transparent fashion,” Draghi said.

Blankfein on emerging markets; dangers of financial technology: Goldman Sachs Chairman and CEO Lloyd Blankfein was all over the TV chat sessions. Blankfein made rather timely comments on how investors view emerging markets differently depending on if those markets are up or down. Blankfein also discussed the aspects of financial services technology that he finds concerning. Specifically, he noted the benefits and also possible threats posed by centralized clearing. “I think there is a law of conservation of risk: You can move it around, but you can’t make it go away.”

The Fragile Five: Renowned economist Nouriel Roubini also talked about the state of emerging markets, noting the political uncertainty weighing on the countries he calls the “Fragile Five”: India, Indonesia, Turkey, Brazil, South Africa

How to keep a French bank French: Societe Generale Chairman and CEO Frederic Oudea talks about matters weighing on the French economy and what his bank is doing to keep top talent in Paris.

Trusting bankers is a regional issue: An international collection of speakers took part in the “Rebuilding Trust in Finance” panel discussion. The panel noted that reputations of the banking industry remains lower in the U.S. and the UK than in other parts of the world. The panel said one way to rebuild trust would be to develop international resolution plans for the banks many still view as “too big to fail.”

Taper this: The panel on “The Future of Monetary Policy” featured George Osbourne, Chancellor of the Exchequer of the United Kingdom, former U.S. Treasury Secretary Larry Summers and current central bankers governors from Japan and Brazil. Bank of Japan Governor Haruhiko Kuroda weighed in on the U.S. Federal Reserve’s tapering. “The Fed has managed normalization very well,” Kuroda said. “Tapering has not disrupted the market at all. We are careful and we will manage the normalization process without creating a balance sheet problem.” Summers issued a call for safer markets overall. “A much greater emphasis needs to be placed on making a system that is safe for ignorance and error and that means emphasis on capital requirements, liquidity and on strengthening the robustness of the system,” Summers said.