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Politics : American Presidential Politics and foreign affairs
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To: TimF who wrote (28311)5/7/2008 5:59:33 PM
From: DuckTapeSunroof  Read Replies (1) of 71588
 
Re: "Is more regulation always the answer? As we dig out from the rubble of the housing bubble...."

Sure.

I agree about the 'housing bubble'... but that is very small potatoes by comparison to the larger problems and risks that have been exposed, (& housing markets are largely already 'regulated').

However the credit default swaps, and other similar derivatives, represent a global market that is TEN TIMES LARGER then the entire market in United States Government Bonds... and it is totally unregulated. There is no competent authority looking into counter-party risks, leverage, etc.

That would be OK with me, except that Bear Stearns (& other examples in recent years where governments were forced to step in to rescue markets for panic and collapses... putting the taxpayers at risk or on the hook whether the authorities act, or whether they don't act), seems to make a fairly clear case that --- as long as SOME ECONOMIC INSTITUTIONS are effectively treated as if they are 'too large to be allowed to fail', as they are today, then there should at least be some sort of oversight and transparency in markets so huge that they hold the potential to collapse global economies without any warning.

At the very LEAST, there should be some sort of a regulated EXCHANGE where such derivative instruments are traded... just as there are for equities and for bonds and for commodities.

That would provide greater transparency for everyone (a market benefit), as well as safer trades for all parties.
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