We don’t need greater transparency on Wall Street
All this talk about greater transparency is just a load of bull.
“The financial crisis highlights the need for greater transparency and oversight, but there has to be a balance. Overregulation could hurt the securities industry, which is vitally important to the State and the City.”
- Thomas DiNapoli in today’s report on Wall Street
If some jerk sets fire to his own house because he’s a moron and it starts a bigger fire that threatens the whole neighborhood, no one says we need greater transparency. How come when Wall Street blows itself up and threatens our entire economic system, everyone starts mouthing this absurd word?
And oversight? Is that like having more cops on the block to watch to make sure the houses don’t burn?
Can someone in government step up and speak English? Platitudes are not going to solve these problems. What we need is enforcement of existing laws and punishment for the enforcers when they ignore problems in the market. We need sane, easy-to-follow rules, like reasonable leverage ratios and income guidelines for mortgages. We need to curtail any structured product that is impossible for a normal person to understand. No more CDOs, CLOs, SIVs…
What exactly was opaque about that last few years? How can Robert Rubin claim he was a 30,000-foot guy and didn’t realize that Citigroup’s enormous investments in mortgage securities weren’t a good idea? Could it be that Rubin and his colleagues were all too rich to notice how far housing had gotten out of whack for ordinary Americans? Is it possible they don’t read newspapers or magazines or watch television? Because otherwise it sure looks like they ignored the problems and probably knew they’d be bailed out. There’s nothing opaque about that.
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25. November 2008 at :
None of the players in this melodrama thought that they would be bailed out of their mistakes, they never thought that their mistakes would catch up with them. Every time the market keeps going up there comes a time when the players all think that it will go up forever without stop. This apparently includes people who have studied out economic history and should know better. What they do is to convince themselves and the rest of the country that the old rules don’t apply. For generations banks only loaned a maximum of 80% of assessed valuation of a house, and they were very stingy about valuing the houses. As the bubble got larger, the banks, which were making fortunes of money originating loans, selling them, and packaging them in strange configurations forgot about the fundamental rules of banking, which is “Don’t put the depositors money at risk.”
Historically, all the old rules are continually forgotten at the height of a Bull Market. And, Historically we have been plagued with recessions and depressions, crashes, busts, and panics. The economy actually has what in a human being might be called Bi Polar Disorder. The cure for that is to take medication which levels off the highs and raises up the lows. Medication for a market economy is called regulation.
The problem that the free marketers have is that they don’t understand that limitations on creativity and self destructive behavior will not quash the creativity in the market, they will channel it to acceptable modes.
For thousands of years the Jewish people have been called the people of the book. They have 613 rules for everyday life, they pray three lengthy times a day, and they are rigidly controlled in their behavior, despite which they have been some of the most creative people in the world. Limits on behavior do not destroy the mind, they enhance it; they require the person to think their way through a limitation and work out a solution so that they can act.
If we enforce the rules of the market and restore those that the free market fools removed, including both Democrats and Republicans, we may end up with an economy which doesn’t self destruct every eighty years or so.
25. November 2008 at :
I’d buy the Jewish metaphor better if anyone actually was praying thrice daily.
25. November 2008 at :
The metaphor was meant to illustrate a three thousand year period, not to exemplify the current situation which has existed for perhaps fifty years. It was also an illustration the value of structure in any type of political, economic or social dealings. Socially, we are no in a period where the relationships between the sexes are so fluid that no one actually knows where he or she is at any given moment of a relationship. This, in my opinion, is not a desirable state of affairs, and neither has the absence of regulation in the economic markets.