Well folks...
From 1978 to 2003 I was deeply embedded in the belly of financial regulation at the state level. When I arrived on the scene the states were adding securities valuation standards, and in the late 80's they applied a risk based capital standard... w/teeth... to supplement the then obvious weaknesses of simple loss ratio and debt ratio standards in a world drunk on "sales;" and being being inundated with weird and wacko financial "contracts" being generated on federally unregulated Wall Street.
Sure we had to deal with the occasional insolvency. More than necessary due to federal "experiments" in health insurance and federally licensed broker/dealers. There was a "successful" prevention of a global insolvency at Lloyd's of London. We had to learn the hard way that Rating Agencies and CPA firms couldn't be relied on for an honest and competent opinion of anything if they could avoid infuriating the people who paid them. We had to put up with federal bank regulators who didn't understand what insurance was... but would gladly let their allegedly regulated banks issue insurance if we didn't sue to stop them.
I could tell you NAFTA and GATT tales to curl your toes... but why go on... Suffice to say it was never dull. Anyway... based on all my experience in financial regulation and dealing with federal financial institutions and governments... no one in Washington is any where close to fixing our current problems.
I tuned in C-SPAN to catch the Senate hearing again, just to make sure. What I did not hear... was as astounding as what I did. All I can say is thanks a lot Mr. Buffett. Old JP Morgan would be proud of you. But I'm not buyin' squat if I don't need to eat it, drink it, wear it, drive it, or live in it. Let me just add a few final rants:
1. FYI neither Credit Default Swaps... CDO's... nor any of the other repackaged derivatives of derivatives have anything to do with insurance. They are not now nor have they ever been risk spreading mechanisms. Some of them may transfer risk... and some of them simply create risk... out of whole cloth. As such they are more akin to betting on someone else's roll of the dice than they are to any contract in the field of insurance.
2. Greespan... Bernanke... I have never seen a federal regulator who demonstrated any concern about, much less an an understanding of, the differences between a wager and insurance.
3. Financial brokers... agents... advisers... managers... whatever you call them, they are all just salesmen. In the age of Google... they are worth little more to an economic system than a good quality lap top PC and certainly no more than a member of any other labor sector. Not much capital ever sits in their hands simply because it serves no significant purpose there... beyond what the salesmen take out.
4. Bankers add very little to the "salesman's" tool kit. Throw in a little more cash and a whole lot more trust. That's the banker's prime justification: simple Trust.
5. The historic conflicts of interest and self-dealing on Wall Street [once justifiable in the name of efficiency prior to the arrival of the network mainframe computer and instant communications] are too deeply ingrained in our "cash flow" Banker/Broker culture to be fixed without some serious risk of civil and economic dislocation.
6. No state or nation can afford to devote the lion's share of its labor, capital or GDP to what should be simple financial services and expect to be a major power, much less a global leader. And when you get to the point that you have to maintain high volume sales of a basically fraudulent commodity in order to survive... history suggests you are already among the living dead.
7. You can run around pounding your chest about Globalization all you want, but who are you trying to kid. Your lawyers can't speak the same language; and you don't have uniform regulatory interests, much less any reliable means of cross-border enforcement... not beyond: "My gun/market/jawbone is bigger."
8. Moving investment banking "financial services" from a Wall Street broker to a San Marcos hedge fund is not going to get off life support.
9. You might try a heart lung transplant. Inject some charismatic leadership, intellect and a lot of inspired cooperative community effort. Follow someone who can convince you that you're (a) not dead; (b) not the amoral, unethical, spawn of hell that you are; and (c) capable of learning the true meaning of the words "trust" and "risk sharing."
Hey... maybe you'll luck out... Might even live to see The BIG Rock touch your sky. Well... maybe not actually "see" it... They tell me the optic nerve can't quite transmit that fast.
0|0 |
