Saturday, October 18, 2008

Deregulation, Fluidity or Europe's Influence

It is a shame that these discussion don't make it to the evening news.

Another 'Deregulation' Myth: A cautionary tale about financial rules that failed.

'As for the SEC, if commissioners took on a massive burden in 2004 without realizing they had signed up to safeguard the world's financial system, then they overreached. But they sure didn't "deregulate."'
Deregulation has never been no regulation, why does that claim get any traction. More regulation is not the answer less, smarter and simpler regulation is.
"Part of the answer is that, instead of a fixed capital ratio standard, Basel II uses mathematical models crunching historical data to determine how risky an institution's assets are and therefore how much capital it needs. For this reason, when the investment banks switched to Basel II in the middle of a housing boom, AAA-rated mortgage-backed securities appeared almost as safe as cash. Oops."
That is fine if you want to go that way but shouldn't there have been a baseline minimum no matter how good things looked? Is there a necessity to continue to make the market more fluid all the time? Set the rules and stop changing them all the time.
"Was Basel II a libertarian plot cooked up at the Cato Institute? Not quite. It was the product of years of effort by the world's major central banks, intended to avoid crises such as the U.S. savings and loan disaster."
Following Europe is always such a good idea. Don't they think very differently about the world then us?

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