Tom Keene's Econo ChatBy
What do they have to do in Europe now?
What they've got to do is make a big adjustment. They somehow have got to get the economy moving more strongly in an environment where they can't change the [currency], and they can't change interest rates, which are already low. That is a long, difficult process.
BNP Paribas talks about parity with the euro by 2011. UBS (UBS) indicates sterling at $1.05. Will weaker currencies give Europe a chance to escape tough decisions?
No. That's the road to inflation and instability.
Let's go domestic. Are you happy with the financial reform bill in the Senate?
I am reasonably happy with it. There are several key provisions that I strongly support.
Which ones, please?
Well, the big problem is the question of "too big to fail." And this bill [tries] to deal with that through what is called a resolution authority. We [arrange] for the government to take over a really significant, failing financial institution much more promptly and arrange what I like to think of as a decent burial. That means they have to be careful at meeting the immediate obligations of that institution, but the authority will facilitate either mergers of parts of it, or a dissolution, or a wind-up of the institution. And that should be done without any feeling of an alternative.
Keene hosts Bloomberg Surveillance 7-10 a.m., 1130 AM in New York, XM129, Sirius 130