"WILLIAM K. BLACK: And their ideologies, which swept away regulation. So, in the example, regulation means that cheaters don't prosper. So, instead of being bad for capitalism, it's what saves capitalism. "Honest purveyors prosper" is what we want. And you need regulation and law enforcement to be able to do this. The tragedy of this crisis is it didn't need to happen at all."
I dont think this gets to the heart of the issue...for example, Madoff was able to work around the regulatory framework for years, even when folks tipped off the regulators that something was wrong...ie, regulation is not a fix for the problems. It is clear that financial firms have used money to influence political decisions about regulation, such as the repeal of glass-steagal and the current problems with passing strong legal control of financial firms.
If the power of the govt can be bought, then it will be bought...so, one solution is to avoid giving govt the power to make such economic choices, and then there is no incentive to buy their votes.
This is the more basic issue, ie the government involvement in the economy, thru the federal reserve, printed money, bail-outs. Most derivatives would not exist if money was gold, as there would be no need to hedge currency and interest rate risks.
If the government prosecuted fraud, with penalties appropriate to the crime (such as death, in china, for massive fraud and theft), and allowed businesses to fail as a result of the use of excessive risk, we might have less severe financial crises.
rp |
