Regulation anyone?

That is a fraction of the problem.

The belly of the beast lies with the Federal Reserve.

 

Mmm. Belly. :reddevil:

 

Perhaps, but the Enron Loophole and the Hedge Fund and Derivatives scams can be controlled through regulation, transparency and oversight...shit that sounds like McCain's campaign speeches lately. It remains to be seen if he'll switch his position from what he supported in May of this year:

http://www.baltimorechronicle.com/2008/051908Leopold.shtml

Guess what McCain didn't vote, but then again Hillary, Biden and Obama didn't either. What do we pay these people for?

Doesn't kick in until next year though:

http://jimhamiltonblog.blogspot.com/2008/05/veto-proof-farm-bill-terminates-enron.html

 

OK here is Robert Reich's list

· The government (that is, taxpayers) must receive an equity stake in every Wall Street financial firm proportional to the amount of bad debt it shoves on to the public. So when and if shares rise, taxpayers are rewarded for accepting so much risk.

· Executives of Wall Street firms must relinquish stock options and this year's other forms of compensation, and agree to future compensation linked to a rolling five-year average of the firm's profitability. Why should taxpayers feather their already amply feathered nests?

· All Wall Street executives must immediately cease making campaign contributions to any candidate for public office in this election cycle or next, all Wall Street public affairs committees (registered fundraising bodies) be closed, and Wall Street lobbyists curtail their activities unless specifically asked for information by policymakers. Why should taxpayers finance Wall Street's outsized political power - especially when that power is being exercised to get favourable terms from taxpayers?

· Wall Street firms must agree to comply with new regulations related to disclosure, capital requirements, conflicts of interest, and market manipulation. The regulations will emerge in 90 days from a bipartisan working group, to be convened immediately. After all, inadequate regulation and lack of oversight got us into this mess.

· Wall Street must agree to give bankruptcy judges the authority to modify the terms of primary mortgages, so homeowners have a fighting chance to keep their homes. Why should they lose their homes when Wall Streeters receive taxpayer money that helps them keep their fancy ones?
http://www.guardian.co.uk/commentisfree/2008/sep/26/useconomy.usa

*

 

The fights that go on are usually over the form regulation takes, rather than over a straight regulation deregulation contest. This would explain the presence of so many well paid lobbyests in and out of Government these days. Everyone is trying to bend the rules of the game to there favor, and to gain advantage over rivals as is natural in this competative system. What deregulation there is is usually selective and targeted as is new regulation.

Maybe if there was a little bit more transperency in the financial system there would not have been so many losses all round. In any case once the market has bottomed out out it would be a good time to start playing the game, that is if you have anything left to play with.

 

This is appropriate if assets are being purchased at above market prices (in fact I made a long comment on this issue a while back). However at market prices, this is harder to explain, since obviously firms would raise the price of the asset they wanted to sell to compensate for the embedded option. So the government would get nothing. Also, "in proportion to the amount of the bad debt it shoves on the public" is kind of nonsensical, since exactly what that proportion means and why it is meaningful is unclear. It may actually be too generous to the banks.

I notice that again the reference is to wall street firms - well a lot of the banks at risk are not wall street firms. They are not investment banks and they are not based in New York. Referring to all of them as a "wall street" firm is depressingly populist and makes me doubt that any of these proposals are serious.

Secondly, why should Vikram Pandit, CEO of Citigroup only since December 2007, relinquish all his compensation and get tied up for five years? This, again, is depressing - its an ignorant populist power grab. It is well meaning - like big government always is - but requires relearning the law of unintended consequences for the 1,000th time.

I mean anyone can see what this rule does - it creates an exodus of bank management either into hedge funds and private equity, or at least into other banks. You can't force people to work somewhere for a price the government sets.

Why should the freedom of speech of a group of people be curtailed by vengeful legislation? Embarassing.

This is an essentially random power grab, and bizarre - government is expected to pre approve leglislation that hasn't been written? There's no reason this has to be forced down anyone's throat, there is clearly a huge demand for it.

Wall Street again, the big gargoyle. But this idea seem to undo the whole point of the bailout, by letting borrowers modify their mortgages against the interest of the banks. Wait, aren't we trying to stop the banks from failing? Its often in the bank's interest to modify a mortgage, and when it is they do so - so this legislation can only be intervening when it isn't,thus weakening the banks..

This debate has all been - very effectively - cast in populist terms. But the reality is Paulson and Bush don't care about the Wall Street firms - that's why they let Lehman fail - they don't even care about the banks. What they care about is the real economy. If the financial system gets in such a crisis that credit market complete freeze up, the real economy and the person on the street suffer. That's what matters. And that's the only reason this bailout is being considered.