RESTRUCTURE-REGULATION IS NOT ENOUGH

REGULATION IS NOT ENOUGH—RESTRUCTURE! The facts behind the news.

In regard to the Financial Reform bill “REGULATION IS NOT ENOUGH” for several reasons. I) It depends on who is doing the regulating.

During the Bush years all the regulatory agencies were underfunded and staffed with people who did not believe in regulation. We are now experiencing the results, whether it’s the SEC and financial regulation, Nancy Nord and Consumer Products such as baby cribs ,or Mining and Mineral Dept.—oil spill, or mine safety-29 coal miners killed, Dept. of the Interior, or lax aircraft maintenance inspection by the FAA and so it goes all across the Govt regulatory organizations.

2)It is also important, to not only focus on mechanical ways to make THE PUBLIC SAFER, but also more broadly on helping people deal with potentially catastrophic complexity. There must be ways to improve the choice architecture — to help people guard against risk creep, false security, groupthink, the good-news bias and all the rest. Ideas from David Brooks NY Times editorial.

This is why it is essential to restructure and put into law policies to protect the public in any of these areas so as to do everything possible to maintain a high level of oversight. The Obrama administration may faithfully follow guidelines but what about future administrations?

1)In regard to Financial Reform this why Derivatives should have no place in commercial banking. They are too risky and were one of the major causes of the recent financial meltdown. Commercial banking should stick to commercial banking or similar low risk activities.

Derivatives and other risky financial arrangements should be handled by specialty firms that offer speculators, wealthy individuals, large corporations the opportunity for large gains and the risk of large losses, and for hedging purposes.

2)Such an arrangement would make commercial banking a more low key risk adverse business. It would tend to keep commercial banks a slower growth business. This is the way commercial banks should be. The Commercial banks should service the savings, checking, mortgages and trust business of the general public They should stay out of risky business that can hurt the general public when things go wrong. See recent meltdown.

The Volcker plan is good but it does not go far enough. It is better to get the “gogo” boys out of the commercial banking business. “Gogo” boys should not be in commercial banking. They should be in other areas of business .