John Sky's  Instablog

After watching the CNBC interview with President Obama, it's an obvious fact that Wall Street will face a regulation overhaul. It make sense for the financial systems to go through some type of reform because the system we have now is vulnerable to systemic risk. There are many hedge funds, and financial institutions that have access to leverage on a scale one can only question. I mean does it really make sense for a $10 Billion hedge fund to the ability to leverage $40 for every $1? This has always been the problem and the cause for many of the market meltdowns. It happen during the crash of '29, crash of '87, the Asian crisis, and many more. It's an obvious problem that Wall Street firms concentrate too much on return and not enough on risk. There's been a big flaw in implementing risk management, and by all means it's not all of Wall Street, but only the Big and powerful. Great examples are Bear Stearns, and AIG, risking not only their money but money lent to them, to make pennies on the dollar and look where that got them?