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"Bankers are playing with fire by increasing risk when taxpayer tolerance with financial bailouts has worn perilously thin, the International Monetary Fund warned. Managing director Dominique Strauss-Kahn reckons bankers may be in the throes of a "Mardi Gras" party of renewed speculation ahead of a looming regulatory crackdown. Yet the return of their old habits is dangerous. If a new financial crisis occurred in a few years" time, the public would be unwilling to support another round of massive bailouts, he told the Confederation of British Industry. Democracy itself could be threatened if banks went back to taxpayers with their caps in their hands. "In an atmosphere of increasing optimism, we see signs of old habits coming back. Risk-taking is on the rise," said Strauss-Kahn. "Right now, regulatory uncertainty is throwing up some perverse incentives. For example, it might be encouraging a risk-taking culture -- a Mardi Gras effect whereby financial institutions party now in expectation of lean times to come. "Clearly, this is dangerous, not least for emerging markets. And we may run out of time -- if we wait too long to implement these reforms, it might be too late." A second wave of rescues may simply not get through national legislatures, he added: "The political reaction would be very strong, putting some democracies at risk." IMF figures show the aftershocks of the 2008 crisis are far from over, with firms recognising only half of their losses worldwide. Yet despite the fragility of the financial sector, there is mounting evidence that traders are making hay before tougher regulatory standards come into force. Investment banking profits have soared this year, as firms make the most of ultra-low interest rates, money-printing operations and huge government bond issuance programmes. Strauss-Kahn argued countries need to act quickly to remove "regulatory uncertainty" -- ensuring bankers do not make the most of the current confusion over future standards

A coalition of privacy groups today urged the Obama Administration to defend California's landmark financial privacy law against the banking industry's legal efforts to overturn it. The US Supreme Court is currently considering taking up the banks' appeal of a 2008 decision by the 9th Circuit Court upholding almost all provisions of the Financial Information Privacy Act of 2003 (SB 1 - Speier). On March 9th, the Supreme Court invited the Obama Administration to voice its opinion on the California privacy law. The case is American Bankers Association v. Brown, Supreme Court Docket Number 08-730. Letters to President Obama and Solicitor General Elena Kagan were signed by The Consumer Federation of California, Privacy Rights Clearinghouse, CALPIRG, Consumers Union, Consumer Action, The Older Women's League, The California Alliance for Retired Americans, and Chris Larsen, Propser Marketplace, and founder of Californians for Privacy Now, the organization that spearheaded a 2003 ballot initiative campaign that turned fierce banking industry opposition into acquiescence with SB 1. "This represents a defining moment for privacy rights" the letter states. We ask you to stand with consumers by telling the Supreme Court to reject the banks' appeal in Brown." Privacy advocates support the State of California's position in this legal matter, which is that there is no merit to the appeal filed by the American Bankers Association. At issue is whether federal laws preempt portions of California law that regulate the sharing of private consumer information within a financial institution's family of affiliates.

DAVOS, Switzerland (Reuters) - Two years ago anyone uttering the words "state" and "regulation" in the same sentence would have been sneered at in high-powered banking circles gathered by the ski slopes of Davos. Now, more than 18 months into the biggest financial upheaval in the last eighty years, those bank executives that still have jobs are preparing to swallow large doses of regulatory medicine to help cure a crisis they are accused of causing. With bank lending still frozen, the world sliding into recession and more than 300,000 financial jobs already gone, policymakers are replacing bankers in the driving seat at this year's World Economic Forum (WEF) to discuss short- and long-term solutions to the sector's woes. "Two years ago nobody could see the problems and the risks," said Marc Weil, head of EMEA Financial Services at consultancy firm Oliver Wyman, which is publishing a report on the state of the global financial services industry this week. "It is clear now that the financial services industry is like no others and anyone that poses systemic risks needs tighter regulation."