Thursday, March 26, 2009

More light

The new rules are a start. I have already written more than enough about crushing the peer to peer OTC system in the trading of "exotic" financial instruments. The Clearing house idea is a start.

What I haven't read, however, is the simplest but most necessary reform of this bilious system. More money for the SEC. Much more money. Three times the funding it gets now at the very least. Some protocol for allocating funding so that the SEC cannot be threatened by the stray bribed senator. An increase of SEC personnel by at least a couple of thousand. Again, the increase should be dictated by the size of the sector to be regulated. If all regulations simply remained the same and the SEC was inflated to a size commensurate with the work it should be doing, we would already have avoided a couple of turns on the slide into the pit. After Bear Stearns fell, amazingly, the SEC did nothing. They sent nary a forensic accountant nor a lawyer into Lehman Bros, Goldman Sachs, Merril etc. etc. In those six months, the zombies and their enablers should have been thoroughly anatomized. They haven't been yet. They may not be ever. And this intentional mystery - mysteries and enigmas are what the Street lives on, now - persists as an elite defense mechanism, against all comers.

More light, as Goethe said, and died. More light.


Anonymous said...

Honestly don't think that will work. You can always invent another "product" and stay ahead of the bureaucrats. Plus, don't forget regulatory capture.

I don't know what will work...flat out outlawing many of the Products" will simply move the casino economy to London-or the Cayman Islands.

Roger Gathmann said...

Regulatory capture, here, was all about a less than resourced regulatory board. That's why - though I agree about new rules - in the end, it all comes down to an animated and independent regulator. The game is not, after all, all on the other side. As any Southern sheriff knows, there's an infinite amount of law to arrest a person if you really want to.

I'd like to see the fees raised charged to financial services companies. That money, just like the charges the FDIC levels on banks, could take away the threat of some CT senator against the SEC. In fact, I'd bet that this would work so well that it will never be proposed.