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|Subject: Re: Countdown to the next financial bomb||Date: 10/7/2012 6:41 PM|
|Author: mauser96||Number: 405514 of 514535|
" internal weakness and interconnectedness to others, and using such vast leverage that threatens me." Over leverage seems to be the key ingredient that could be regulated in some reasonable way.
I don't think regulators have any corner on wisdom, they will make their own mistakes. Over regulation (the inclination of agencies) and under regulation (the proclivity of bankers) both can produce bad results. Both have to be limited, not an easy task. History shows that banks blow up every few decades , they will undertake something where neither they or the regulators see the risk at the time. Prohibit X and banks will do Y. Prohibit too many things and you retard commerce. Banks lend money, a hazardous undertaking in itself. You can't make it too attractive or too unattractive.
But the hazard to the system can be limited by limiting leverage and inter-connectivity even if the risks of specific activities are not seen by most at the time. Excessive risk taking by management can perhaps be reduced by some sort of clawback provision to their income, activated if they go bust and need public help.
But no matter what is done 2008 will not be the last banking crisis.
Ultimately regulators are the creatures of the legislature, and what big money interests want will eventually become the rules.
An article on recent regulatory failures by the left leaning Washington Post
Bernake 2007 " we see no serious broad spillover to banks or thrift institutions from the problems in the subprime market,"
Putting more regulators at work can be like loading more people in a sinking boat. It will just sink faster unless some of the new people can identify and fix the leaks.
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