Azerbaijan, Baku, Sept. 7 / Trend , A.Badalova/
Barack Obama's new plan to strengthen control over banking capital is a dangerous policy which may lead to furthering unemployment in the world, believes Gene Aldridge, professor and President of the U.S. World Marketing company.
"The eight-point program will kill the worldwide banking industry's ability to make loans, thus there will be no recharging of the economy for the unemployed in the world," Aldridge wrote to Trend in an email.
Last week, the Obama Administration unveiled a set of principles according to which the minimum capital standards for financial institutions are planned to be raised. These principles will be proposed as being fundamental to the development of a new international capital agreement, which began to be laid out at a meeting in London of G20 finance ministers and the heads of central banks.
Under the plan, in the future the world's banks should be subject to more severe capital controls and liquidity. In addition, the assessment system for the risks of a bank's assets and the stock capital needed to cover them is planned to be improved.
This is a very dangerous policy because it also further weakens the profit picture for the banks already in trouble, Aldridge believes.
"Capital reserves must be held to sustain the banking industry, but to seek even more in reserves hurts profit and ties up capital that could be used for real loans to small and medium-sized businesses that need working capital to survive," Aldridge said.
He said this policy will further aggravate the unemployment situation worldwide, both now and into the future.
"The policy on capital reserves is a Trojan Horse economically disguised as a way to rein in bad banking, but in effect is furthering the Obama socialism with even more stealth government interventions that will not work," Aldridge said.
Capital needs to be in the hands of the private sector, not in the hands of the public to re-energize the economic conditions world-wide, Aldridge said.