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Give 'em enough rope and financial regulators will always do the wrong thing, writes Steve Randy...
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Saturday, November 14, 2009, 8:00 AM ETGive 'em enough rope and financial regulators will always do the wrong thing, writes Steve Randy Waldman. We need a structure where banks are universally small - not necessarily in balance sheets, but in exposure to the system.
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Japan's crash was led by the world's largest banks. America's banking panics in the 1930's were mostly in small, rural banks. The post-Waterloo crash in 1825 in the UK occurred in a minimal corporate regulation environment. The South Sea Bubble of a century earlier happened in a legal environment where you needed an Act of Parliament to get a corporate charter.
Bubbles, crashes, panics, seem to be inevitable. The way to best prepare for them seems to be: less corporate, household and government debt, and conservative asset allocation
> Bubbles, crashes, panics, seem to be inevitable. The way to best
> prepare for them seems to be: less corporate, household and government
> debt, and conservative asset allocation
Finally some common sense. This can fixed by setting higher capital and lower leverage requirements. Put the bank owners at risk instead of tax payers and guess what? They won't take the risk. Congress could have averting this whole mess, but instead think most voters are idiots and will believe that it was the evil banks that caused the problems, not the bought off congress.
Its time to stand up and let Congress know that propaganda will not fix the problem. They need to go.
1) An evolutionary restoration of lending models that do not permit excess leverage.
2) Peer to Peer banking using the Internet and allowed by any individual whom wishes to lend to another. The market sets all interest rates. The model is made completely transparent and every person on earth can vote on the model itself and how it is regulated.
3) The concept of Justice must be explored once again, philosophically understood and translated into a new global Republic. Rigid anti trust laws must be established as part of a global Constitution. The majority on earth must be willing to run towards the solution. We are nowhere near this point so we had best get started as in yestererday.