What's that you say? You're eagerly awaiting wide-sweeping reform and increased regulation to make sure the Fannie Mae's and AIG's of the world don't commit the sins of the past in our near future? Well, join the crowd of investors, government watchdogs, and plain ol' taxpayers such as myself who wonder in earnest when the change we voted for will kick in. Gregory Zuckerman of the WSJ says don't hold your breath. While the big, systemic issues have been debated and identified, few measures have been put in place to protect our financial future.
The positives are that banks and Wall Street firms have slashed heavy debt down to about half of 2007 levels which is considerably more manageable and without inordinate risk. Also, needlessly complicated financial instruments like "synthetic CDOs" are getting much less attention as firms focus on more sensible products. At the SEC, information exchange is being scrutinized for legality in the conversations between traders, bankers, and other players. Gold-Sachs execs being paid bonuses in uncashable stocks (5 yr holding period) seems a good idea on the surface but the problem is much deeper.
(...to be continued)
PT 2:
Not so positive is the lingering suspicion that once the government money is paid back, Wall Street will be back to business as usual. The hyper-skeptical not-so-quietly mused if we have not been partakers of an elaborate drama, the conclusion of which strangely mirroring the introduction. Wall Street firms still pay more than half their revenue out as compensation. Hedge funds like Paulson&Co. are INCREASING leverage rather than lowering their debt levels and there is precariously little chatter about big firm breakup of the JP Morgans and Goldman Sachs of the world. The lessons of too big to fall clearly have fallen on deaf ears amongst the too big.
Maybe you can answer this one: Are credit default swaps being traded on public exchanges yet, thereby enhancing visibility and needed scrutiny? Have any rules been change to increase the amount of capital our banks must hold as a percentage of assets? No, and no again. When we asked for change, perhaps we should have specified non-cyclical...
PT 2:
Not so positive is the lingering suspicion that once the government money is paid back, Wall Street will be back to business as usual. The hyper-skeptical not-so-quietly mused if we have not been partakers of an elaborate drama, the conclusion of which strangely mirroring the introduction. Wall Street firms still pay more than half their revenue out as compensation. Hedge funds like Paulson&Co. are INCREASING leverage rather than lowering their debt levels and there is precariously little chatter about big firm breakup of the JP Morgans and Goldman Sachs of the world. The lessons of too big to fall clearly have fallen on deaf ears amongst the too big.
Maybe you can answer this one: Are credit default swaps being traded on public exchanges yet, thereby enhancing visibility and needed scrutiny? Have any rules been change to increase the amount of capital our banks must hold as a percentage of assets? No, and no again. When we asked for change, perhaps we should have specified non-cyclical...
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