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Posted by on Apr 24, 2010 in Economy, In The News, TG Roundup

His Cure is Worse than the Disease

I think Senator Dodd’s bill on Financial Reform is no-good, very-bad, ugly bill!

I have been investing/trading stocks and options (derivatives) for nearly 20 years. I read a lot of stuff on economy, markets etc etc. These are my 2 cents on Financial Regulation based on whatever I come to know from my exposure and experience.

  1. In general, we probably don’t need more enforcement laws or even a new consumer protection agency. What good is a new low when you failed to enforce the ones that are already on the books? Bush’s SEC slept at the wheel when mortgage fraud was rampant. [I have lots of cases as evidence of this – including a high profile case in Cleveland. When regulators zeroed in mortgage fraud cases, the Ohio Republican majority legislature eliminated several regulations.]
  2. Enforce the existing laws
  3. Bring back Glass-Steagall; Consumer deposit banks should not do trading. Period.
  4. Hire more sleuths at SEC and empower them
  5. Break-up the big banks by capping their size and size of derivatives trading
  6. Get more transparency to derivatives
  7. Cap the leverage
  8. Do not recruit ex-Wall Street guys from enforcing roles at SEC – at least for 2 years after they leave Wall Street.
  9. Increase tier 1 capital requirement ratio back to pre-1992 level (when Greenspan lowered it to prevent CitiBank demise.)
  10. Biggest of them all – abolish the Federal Reserve Board, or make them more transparent and accountable to the public. No more than one term for a Fed chair.

Senator Dodd’s plan is a big joke. A bad fix is worse than the disease. Senator Koffman has it right.