Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Financial Industry Regulations, There Needs To Be Consequences

Politics / Market Regulation Apr 24, 2010 - 01:08 AM GMT

By: Sy_Harding

Politics

Best Financial Markets Analysis ArticleRob a bank and you know you’ll go to prison if you’re caught. Fail to pay your taxes and you’ll personally pay a large penalty and perhaps spend time in prison. Drive your car recklessly and you know you’ll pay if you’re caught. Make bad or careless decisions in your business and the result could be bankruptcy.


Knowing there are consequences for illegal, questionable, dangerous, or mis-guided behavior is an important deterrent that works quite well.

Obviously requiring bank-robbers to merely return some of the money and promise not to do it again, allowing tax-payers to simply file and pay when caught, or reckless drivers to repeatedly drive off with just a warning, would deter none of the wrongdoers. Showing businesses that if they make repeated bad decisions that result in failure they will be bailed out and allowed to continue as before would only invite more reckless behavior and a larger failure down the road.

Obviously, such lack of consequences would also encourage many more to engage in similar behavior and activities in the future.

I bring that up as Congress considers re-jiggering financial regulations to protect investors, consumers, and ultimately the financial well-being of the country, from the sometimes questionable, sometimes dangerous, sometimes illegal activities in the financial industry.

There needs to be consequences for those who cross the line, as in other walks of life and business, consequences commensurate with the damage that results from their activities.

The majority of individuals and businesses in the financial industry are honest and upstanding, at least those I have met. They go after profits and successful careers in ways that not only comply with the regulations as written, but with the spirit and intentions of the regulations.

However, there are also individuals and businesses who prefer to game the system, looking for loopholes, or even ignoring regulations altogether, hoping they will not be caught, but knowing that under regulations as periodically revised over the last century, if they are caught the consequences will simply be an acceptable cost of doing business.

We’ve had many decades of examples. We’ve also seen each financial collapse, bursting bubble, or bank bailout since the 1970’s more severe than the last, involve more sections of the financial industry, and cost more to fix. If the spiral is not halted, the trend is toward a financial doomsday from which merely taking from future generations to bail the current system out will not work.

Unfortunately the spiral will not be halted by simply redefining financial industry regulations to close the latest loopholes, or the questionable practices the latest collapse has revealed, or by providing regulators with more people to supervise the complexities of financial firms, or more power to regulate.

The only hope for new regulations to finally succeed this time is if they implant fear of real consequences for those who ignore them or try to circumvent them.

It is no deterrent at all when the known consequences for those who are caught is that they will be allowed to make partial reimbursements and say they’re sorry, or get away with settlements in which they ‘neither admit nor deny guilt but agree not to engage in such practices in the future’, and fines paid by corporations while the decision-making executives do not even lose their jobs, at most having to move down the street to a similar position at another firm.

The need for real consequences is obvious. Let’s hope we see the need met in the new regulations that are apparently approaching their final stage of Congressional debate and negotiation.

It would be a shame to lose the opportunity. As the old cliché goes, fool us once, shame on you, fool us twice shame on us. We can add regarding Congress and the financial industry, fool us again, shame on you and heaven help us all in the future.

Sy Harding is president of Asset Management Research Corp, publishers of the financial website www.StreetSmartReport.com, and the free daily market blog, www.SyHardingblog.com.

© 2010 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in