|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
Greed Always Wins
Liz Moyer
Forbes.com. April 1, 2008
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EXCERPT: Treasury Secretary Henry Paulson's plan to overhaul regulation of the financial markets aims to prevent future crises like the one currently gripping Wall Street. Good luck with that. Paulson, a former chief executive of Goldman Sachs, must know there's little government can really do to stop Wall Street's creativity and its sometimes painful results. Improved technology and information flows, the increasing influence of professional investors and the convergence of financial markets are all fostering an atmosphere of innovation in products designed to spread risk and keep the money machine humming. To be fair, Paulson acknowledges as much in the executive summary of his 212-page plan, formally unveiled Monday. He says Washington finally needs to catch up. But Washington is facing off against a species--the Wall Street worker--whose whole life, career, fortune, future prospects, and indeed, happiness, are tied up in one thing: finding an edge. So while Paulson's plan proposes a dramatic retooling of the multiple layers of federal and state financial regulators, putting more emphasis at the federal level and merging or abolishing some agencies in favor of new or substantially enhanced existing regulators, it doesn't address the core problem. No matter how the companies are regulated, sophisticated products like swaps and derivatives "are so complicated and massive in scope that no government agency or agencies can keep up with private-sector sophistication," says James Leach, the former Iowa Congressman who lent his name to the 1999 law repealing Depression-era separations of Wall Street and Main Street banks. "No general category of institution can be relied upon not to make mistakes," Leach, now head of Harvard University's Institute of Politics, said in an e-mail Monday. "The most important thing government can do is work to ensure competition and improve transparency as much as possible, and, above all, contain the lure of leveraging." Or, as Bert Ely, a bank regulatory consultant in Alexandria, Va., says, "the problem isn't in the quality of the refereeing or who's doing it, but in the rules of the game." The fact that many on Wall Street are cheering the proposed changes should give pause. It is often Wall Street pushing for changes in regulations that allow them to go further out on the risk limb. |
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