Moon Kil Woong

Sonenshine on Financial Crisis and Reform

I'm 100% on his solution. It mirrors most of the people's calls on Seeking Alpha. The market is half blind and we aren't living in the land of the blind.

We need transparency and sound financial statements. We need banks to not avoid their gearing cap by funneling all investors into non-FDIC insured products and then asking for their unfunded investments to be guaranteed anyway. We need to get rid of Base I off balance sheet accounting. We need to require derivatives position disclosure.

How can you hedge what you can't see. How can you value a stock correctly when a giant financial iceberg remains hidden from view. How can we regulate that which can be written on anything for any reason. Derivatives currently can be written on arcane stuff like banks defaulting, defaults of US on its bonds, a roulette wheel spin, corporate bond defaults, mortgage defaults, meteor strikes, etc. Basically it can be written on anything moral or not. This is often not investing, it's gambling.

The fact that some derivatives are in essence gambling has been brought up before. The solution was not to regulate them because they weren't really financial investments (more like gambling). Since there is no regulation parties can bet against their own positions in the dark (Goldman Sacs), write infinite amounts of contracts with no collateral or risk profile (AIG), hide losses off the balance sheet at will (after all they aren't liquid), bet on the US government going bankrupt, and make gambles with seedy parties that they know don't have the assets or collateral to back up or pay any of their bets on (a problem Goldman has, that's why AIG is given billions to pay contracts to them). Who knows, maybe banks should get into CIA business and start betting on the fall of governments all around the world. Gee maybe they already did. Hell if anyone will know. They are completely unregulated.

So next time an analyst talks about risk. Ask them what the risk of putting you hand in a 6x6 foot black box. As far as I can tell banks put their heads in a lot of these types of boxes. Unfortunately a lot of these boxes made some growling sound before they did.