In my opinion, these plans will amount to nothing until
after the election. Its just a way for the current administration to
attempt to force the issue down a certain direction. That way, Paulson
can tell his buddies (soon to be his co-workers) that "I tried my best".
I like this summary of the "new" plans for regulation at Naked Capitalism.
We
clearly need a considerable change in our current regime, and cries for
this are only going to get louder. What is a bit surprising to me, is
that none of the candidates are talking about this very much. But
somehow, I don't think the democrats (or even McCain) will find the
treasury proposal to be sufficient...not nearly.
Regardless
of how things go, I think that this "situation" will mark a high (or
low as you will) water mark for financial deregulation. No matter which
way you go on this, the Fed's powers are going to expand, and I think
we are past due for consolidation of regulators as well.
Even
Paulson seems to have realized the SEC is basically useless, and should
be put in the trunk with the rest of the junk. Let's see how many
areas they have been useless: Accountants, Enron, insider trading,
ratings agencies, investment bankers. Aside from basically everything
they have been told to regulate, they are right on top of things!
Sadly,
I can see the baby about to be thrown out with the bath water;
financial product innovation. Yes, things went WAY too far. But we
could seriously enter a sort of "dark ages" in new products because of
all this. This terrible news for the U.S. more than any other
country. The finance business is one of the few areas where the U.S.
is still well on top.
So with tighter regulations, subdued
product innovation, and a general chaos of how to assign risk to
basically any financial product, how do you think these trends will
affect the financial services sector?
Maybe we are close to a
bottom for financial stocks. But it will be a long time until we see a
boom in that sector, unless a dramatic change occurs. Its a good time
to be a risk manager, but not so good to be a "profit center" guy.
