It has been reported that some of the Dow’s 370 point loss on Thursday was due to the news that new tougher rules were a-coming to the Street. In Friday’s WSJ headlines, ‘Wall Street Firms Brace for Seismic Changes’. Some investment analysts expect that the new reform law will cost major financial institutions as much 20% in profits. Don’t you believe it.
Before you blame the ‘Know-Nothings’ in Washington for making big government even bigger and getting their nose into businesses they know little about let me say that this time they didn’t have a choice. It would be nice if we allowed bankers and investment types to simply run their businesses like the corner dry goods shop and count on them to be honest and courteous to everyone. We wouldn’t need governments or security police-people to be looking over their shoulder and making sure they were on the straight and narrow to keep the rest of us safe from the possibility of them creating predatory practices or investments that go boom. But it seems we can’t and we need more laws and more oversight to keep the thieves out of the business.
It was Wall Street and bankers that killed their own golden goose because of their greed and supreme belief they could do anything, get rich at other people’s expense and get away with it. Well enough is enough. As someone who has been in the business for four decades it is embarrassing how some of the people in my business stole money and pretended they were not to blame. Then there were others who publicly proclaimed what they were doing as almost a sacred mission while privately deriding those that bought their toxic products as imbeciles. Then they were those who were supported in their alleged criminal actions by a billionaire old coot who had tens of millions to protect and said it was okay not to disclose anything to a buyer of toxic crap if the end buyer was that stupid not to be able to do their own due diligence.
In 1934 Congress established the Securities and Exchange Commission as an independent regulatory agency. Franklin D. Roosevelt named Joseph Kennedy as its first chairman because, as he reputedly said in private, ‘It takes a thief to catch a thief’.
The SEC was formed not because there were no laws overseeing bankers and investment firms at the time but because the bankers and investment types were getting around the rules that were on the books.
It seems that every time bankers and investment firms are given more latitude by the government to police themselves or act in the best interest of the customer they take advantage of it with disastrous consequences. You never hear or read of an airline manufacturer or chicken farmer throwing an economy into a depression. It is always bankers and investment firms.
The new Financial Oversight Law will be lengthy and stringent and cover every almost every contingency that the Congress and their staff of lawyers and accountants can possibly think of but I am here to tell you that it will not be enough. By the time the ink dries on this law bankers and investment firms will have uncovered generous loopholes that will allow them to game the system and make billions of dollars at the expense of others. It is what they are and what they seem to do best.
I am not a proponent of big government. From the time that I could understand what a government is and does I’ve always felt that the main duty of government was and is to protect its citizens. Today I believe that security extends to include protection against those that would also do us financial harm.
Today we are angry enough at those that threw the entire global economy into the toilet that we are not going to make it easy for them to squirm off the hook. To mollify us bankers are taking a proactive position. Already I am hearing commercials on radio promoting the goodness of the American banker. Hogwash. They screwed up trying to get rich quick. We bailed them out. They paid themselves enormous salaries as their way of saying thanks and stopped lending to every day folk who needed loans with the money we gave them and just hoarded it for their own self purpose. This is not my next door neighbor.
We also have to understand that this is, and should be, a never ending battle. Congress passed some very strict laws after the last depression but as time went on we believed that bankers and investment people were more sophisticated and so we relaxed our laws and oversight in the name of economy and profit. And each time we did there were those that took advantage of us for their own greedy purposes. It happened before and it will indeed happen again. It may take another 85 years but it will happen and then happen again. You can be assured, unfortunately, no matter what we do today our great-grandchildren will be facing similar problems. It is who and what these type of people are.
Unfortunately this new law will create more government and make it more expensive for all of us to invest and save. We are paying to safeguard ourselves from those we are supposed to trust to manage our savings and future. It doesn’t make sense that we have to regulate people to do the right thing but we’ve seen what they do without close oversight and supervision. So don’t blame the bureaucrats this time. We don’t need to do this we have to do this.
If you have questions call Paul at 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.
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