Sunday, September 28, 2008

Funny Financial Quote

S.E.C. Concedes Oversight Flaws Fueled Collapse

From the NYTimes:

The chairman of the Securities and Exchange Commission, a longtime proponent of deregulation, acknowledged on Friday that failures in a voluntary supervision program for Wall Street’s largest investment banks had contributed to the global financial crisis, and he abruptly shut the program down.

(and later on in the article - and what I find funny)

On one level, the commission’s decision to end the regulatory program was somewhat academic, because the five biggest independent Wall Street firms have all disappeared.

The Fed and Treasury Department forced Bear Stearns into a merger with JPMorgan Chase in March. And in the last month, Lehman Brothers went into bankruptcy, Merrill Lynch was acquired by Bank of America, and Morgan Stanley and Goldman Sachs changed their corporate structures to become bank holding companies, which the Federal Reserve regulates.

Anyhow, found it funny. Not all regulation is bad regulation - especially when insurance is behind the system - be it financial/banking system, or the healthcare system. Active players in a fully competitive free-market environment will find ways to game the system, and good regulations try to limit that. (Yes, I work in the risk management industry and see regularly ways people try to get around the intentions we put in place to minimize risk).

By the way, here's another good article in the NYTimes about Goldman Sach's close call - along with some interesting perspective on leverage.

EDIT: Adding another - a good op-ed by Ben Stein "In Financial Food Chains, Little Guys Can’t Win"

First, I am furious at what the traders, speculators, hedge funds and the government have done to everyone who is saving and investing for retirement and future security.

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