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Follows a short list of additional measures I’d take to help prevent future nightmares on Wall Street. To my knowledge, not one of these things was included in Obama’s timid “reform” program.
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♣ Curtail buying on margin.
Supposedly one of the main lessons we learned from the Great Depression was that you shouldn’t allow people to play the stock market with borrowed money. But apparently, the lesson was not learned at all, because much of the market’s bloat this time around was due to that same problem: buying on margin. It’s time to get serious about this.
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♣ Outlaw credit default swaps and other “derivatives” — particularly those where an investor can bet on a company’s likelihood of failing.
After the smoke from the 2008 disaster cleared, it was discovered that some investment banks and brokers had actually cleaned up by betting that stock prices would collapse. In some cases, banks had even bet against their own clients. They’d buy large chunks of stock for the client, then turn around and bet against that same stock. As far as I know, this practice is still legal.
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♣ Raise the reserve funding requirement for pension funds and strictly curtail the ability of companies to meddle with their own employee’s money.
Remember Enron? Well, one of the many ways that Enron screwed people was by manipulating its own employees’ pension funds, using them to buy large amounts of Enron stock in order to inflate the stock price. When the company went bust, the employees (most of whom had done nothing wrong) were the biggest losers of all.
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♣ Limit reliance on bond rating companies and investigate those that could be guilty of fraud or malfeasance.
Just months before the 2008 crash, the Standard & Poors company was still giving its highest rating (AAA) to bonds that were based on murky and highly leveraged sub-prime loans. Later, this same company downgraded T-bills (which are based on the full faith and credit of the United States) in response to the Obama administration’s moves to limit the power of investment bankers.
At its worst, the S & P is a weapon used by Wall Street to protect itself and block change. At best, it is merely incompetent. Like Mr. Killinger.
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And speaking of . . . why are we still in awe of fools like Kerry Killinger, Jamie Dimon and the rest? Why do we still — in spite of every proof to the contrary — accept that these people deserve our trust, or that they somehow earn their obscenely fat salaries?
If there were any justice, we wouldn’t be rewarding such buffoonery. Instead, there’d be a nationally televised public caning held on the steps of the Stock Exchange building every Saturday morning.
Right after the cartoons.
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From today’s Seattle Times:
http://tinyurl.com/cane-em-now-cane-em-hard
[In January 2008] House Minority Leader John Boehner became the Bush administration’s point person on Capitol Hill to negotiate a $150 billion stimulus package.
In the days that followed, Treasury Secretary Henry Paulson made frequent phone calls and visits to Boehner. [ . . . ] On Jan. 23, Boehner, R-Ohio, met Paulson for breakfast. Boehner would later report the rearrangement of a portion of his own financial portfolio made on that same day. He sold between $50,000 and $100,000 from a more aggressive mutual fund and moved money into a safer investment. [ . . . ]
Boehner is one of 34 members of Congress who took steps during the financial crisis to recast their investment portfolios after phone calls or meetings with Paulson, his successor Timothy Geithner or Federal Reserve Chairman Ben Bernanke, according to a Washington Post examination of appointment calendars and congressional disclosure forms.
The lawmakers, many of whom held leadership positions and committee chairmanships in the House and Senate, changed portions of their portfolios a total of 166 times within two business days of speaking or meeting with the administration officials. The party affiliations of the lawmakers were about evenly divided between Democrats and Republicans, 19 to 15.
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