Why the Financial Regulation Proposal is Unsatisfying

The problem with the sort of supra-national control that you suggest is that is just code for handing over complete control to the US. Nobody out there would be so stupid enough to do that. Why are you surprised that the response would be some slightly more polite form of F*** Y**!?

Fine... regulation is impossible to execute given the complex global scope of it. So? Does everything need an equivalent complex answer?

There is something called "Crime" and "Punishment". If you make the punishment suited for the crime, rarely will anybody opt to commit that crime.

All you need to define is what is the crime in this context? And then punishment can be doled out in various forms, e.g., give 20+ years back of your income, prison time, banned from the industry, stopped doing business for many years in a particular country or a particular product, higher taxes, etc.

Please, you have enough intelligence.
You do write good. But there is no
need to fool the public indicating that it is an impossible task. Where there is a will, there is a way.

Regulation is impossible or implausible as we are made to believe and all fingers point to the government for doing such a horrible job…but what about the financial institutions who are making the choices to go abroad knowing very well the consequences and what the US Government has put up to help them. Its fine to make money, it’s what America was founded on (if we want to be honest with ourselves) but when your mode of making money has such negative impact to the best interest of the nation and the people who have made your business and industry succeed then what are we to say about the dedication of these companies. We need some real patriots here, people who value the success of our country and its people over their greed and realize that their continued success go hand in hand, shared interest if you will. What do business ethics at financial firms and the Doto bird have in common?... they don’t exist.

Another useless article from America's maninstream media. They are quick to admit when thiings are bad but ONLY AFTER you have lost everything. Meanwhile, when real experts are trying to warn us like Mike Stathis, they are shut out by the media.

If you want the truth and the best insight into the financial markets and the tricks used by the media to fool us all, check out Stathis' website www.avaresearch.com

I agree with Axy above - the solution to much of our regulation problem is to punish the real 'evil doers' - greedy execs who put their own over indulgences ahead of what is good for this country. If a few more of these bozos went to prison AND had to pay the money back, more would think long and hard about repeating their errors.

In a system designed to reward greed and gambling you will get extreme greed and gambling. I do believe every market has to have regulations; every game has to have rules. But instead of looking at methods of punishment, perhaps we ought to be reconsidering the rewards. It's just like children; rewarding them for good behaviour is more effective than punishing them for bad. I'm not sure I have a specific suggestion, but a change in perspective might help.

Having said that, I think a lot of problems would be solved by two rule changes in the game. 1) Cut the allowed leverage to 5:1. 2) Explanation of any investment should not take more than 250 words and should be fully understandable to the average person with a Bachelor's degree.

I've got news for you. By the time the "next crisis" rolls around the dollar won't exist, as national currencies will be destroyed by private digital currencies, and as a result central banks will have disappeared. The lesson to take from these centuries of financial crises is that regulation is irrelevant, what matters is enlightened investors. If you think you can build the perfect cage that will keep the sheep safe and the wolves out, you're ignoring centuries of evidence that says otherwise. The only way forward is to teach the sheep to recognize the wolves and stay away themselves: for investors to do their own due diligence on whether they should buy notes from a US investment bank or not. If these Lehman note buyers thought 6% returns came with no risk and didn't look into who was backing them, they deserve their losses. If they were lied to about the Lehman origins, I'm sure there are legal options to recover some of their money. Ultimately the buyer has all the power, if they don't use it to compel relevant information, they deserve what they get. Even as astute an investor as Warren Buffett stays away from tech stocks because he doesn't understand their business, you have to stay away from what you don't understand. Anyway, the coming information revolution will provide so much help for investors in choosing appropriate investments that these mooted regulations will thankfully be ignored, another example of the irrelevance of govt.

You've just illustrated the "think globally, act locally" principal applied to regulation. When you realize you can't compel other nations to do things, you realize that you'd best focus on your own behavior. I'm not as opposed to regulation as some, but I recognize that almost any time you constrain a company's behavior, you've made them less competitive. So any regulation, any constraint of freedom, comes at a high cost.

That said, I think our focus is best spent on transparency and making sure that risk is appropriately shared, in good times and in bad. We should not set out to prevent failures. And remember, from everything I've read on Setser's blog, the impetus has been from foreign central banks. How hard do we *really* want to encourage them to use US institutions to wash their hands of risk just so they can prop up their exports and manipulate trade?

It is unclear in the paragraph where you "translate" the Obama administration quote whether you are rephrasing the quote or if it is your interpretation. If you meant for it to be just a rephrasing, either you missed the point of the quote or the full context was not presented.

I haven't read the Obama administration plan, but no where in the aforementioned quote does it imply that the only means to "truly solve this problem is for countries to give up some national sovereignty, and allow a central global board to allocate the global losses during a crisis to different countries." The Obama administration quote merely suggests further research on how to allocate the financial burdens from the failings of large organizations.

The Obama Administration argues that there is market failure in the financial markets; that because of greed, a lack of transparency, and the selling of unregulated derivatives the U.S. and the globe is in the middle of a financial crisis. Regulations requiring the sale of certain derivatives on an open exchange may address the transparency issue but Mr. Obama's proposal does not go to the root cause of the crisis which was that borrowers, for whatever reasons, could not meet the obligations underlying these instruments.

Alton Drew
www.altondrew.com

It seems to me highly likely that the ho-hum response of the markets to these regulation proposals confirms that the soft underbelly lies in the untouched arenas. One can hardly blame the administration and the Fed for creatively avoiding pulling the rug out from under the global financial "system" at this time.

The complexity of these highly risky instruments merely provides a convenient excuse for not messing with them. I sincerely hope that in calmer financial times, the government will awake to the fact that many of the so-called sophisticated players were allowed to breach the high net worth barriers to entry by representing large groups of individuals whose net worth never would have justified the risk. Let the genuinely rich gamble and try to manipulate nations all they please, with their own money.

Michael.

Excellent comments.

The Henry-Goldstein article was also excellent.