Wednesday, January 13, 2010

About the Wall Street Hearings

Today we will see more theater regarding Wall Street. I've been silent on this issue because so far the entire exercise has been pointless. Here's how you deal with the problem.

Regarding wall street firms, you have two choices:

1.) Allow big institutions to exist, but regulate them with a regulator who has teeth and is willing to use its teeth.


2.) Reinstate Glass Steagall

Regarding derivatives, put them (all) on a regulated market. Personally, I would argue for the CBOE, but that's just me. Others are available and equally qualified.

Regarding consumer credit issues, eliminate the really hyper-fancy loans (like option ARMs and IOs) as a product for consumers. Consumers get a choice: a 15 year mortgage or a 30 year mortgage. Simple.

This isn't rocket science -- it's actually pretty straight-forward.

The basic problem is both parties are represented by idiots. Back when there were calls for nationalizing all the banks I wrote several pieces arguing against it. The basic reason is this: yes the current crop of bankers are incompetent. But -- do you really want Chuck Schumer and Mitch McConnel in charge of a bank? If you think it's bad now -- wait until these idiots start to make loan decisions.

So we'll see lots of grand-standing, camera hogging, and lots of terms thrown around that the speaker doesn't understand what they just said, and then nothing will be accomplished.