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0 pointsawt11y ago0 comments

If there were a law that could prevent regulatory capture then I would say go for it, more regulation.

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chc11y ago

With or without regulatory capture, I can't see how the problem we face is too much oversight on Wall Street.

The counterargument is that regulation hurts small players more than large ones. Citibank can afford an army of compliance officers; most of us can't.

I'm generally pro-regulation, if the details are sensible, but regulatory capture is a real problem, and it is not an unreasonable stance that the cure is sometimes worse than the disease.

chc11y ago

That isn't really a counterargument; it's just a factoid. A counterargument would be something along the lines of "Regulation hurts small players more than large ones, and the scarcity of small players has been the biggest problem with Wall Street over the past decade because _____, therefore the problem with Wall Street is too much oversight."

wpietri11y ago

Regulatory capture's a real issue, but it's not a given. For those interested in the topic, I highly recommend Shelia Bair's "Bull By The Horns", which is her account of running the FDIC up to and during the financial crisis. It left me with quite a bit of respect for the FDIC's approach, and for what solid regulation takes.

wyager11y ago

Why should people on wall street be forbidden from doing whatever investments they want to, insofar as they are contractually allowed? If you don't like how someone is investing, don't invest with them. If you think certain banks are behaving riskilly, don't give them your money. What are some counter-arguments to this? I.e. why is it a) moral and b) desirable to regulate the activity of wall street traders in addition to the laws they are automatically subject to (like anti-fraud laws)?

karl_gluck11y ago

The argument is actually fairly simple: behaviors that have been known to cause fraudulent or deceptive activity in the past are placed under more scrutiny or outright banned.

For example, it becomes quite easy to hide fraud when a single entity is both an investment bank and a mortgage lender.

In my layman's opinion, a lot of the problem comes from the fact that accounting is not an exact science. For a large company with many revenue, expenditure and investment streams spread over the course of a year, accountants have a lot of leeway to massage the numbers as they see fit. Until the house of cards comes crashing down ala 2008 it can be very hard to pick apart what is actually going on from the outside.

pyoung11y ago

I would imagine most of the laws and regulations are anti-fraud in nature. Outside of that, limiting the risk exposure of banks that carry FDIC insurance, or some other government backing, is in the interest in of all taxpayers. From my laymen's understanding, if you want to start a hedge fund, take some rich people's money, and gamble it all away, nothing is really stopping you. In fact people do it all the time.

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tvhiggins11y ago

imo its the fact that we're so reliant on 3-4 big banks as opposed to 100 banks. if it were more decentralized, US could afford less regulation and just let companies succeed/fail on their own. can't do that in the current climate

chc11y ago

I don't think it would look the way you imagine. There are lots of computer software vendors, but if you wiped out Apple, Microsoft and a few core Linux contributors, you'd pretty much wreck the computer world, even for people who directly use other vendors. The existence of smaller players does not negate the influence of the larger ones.

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chc11y ago

With or without regulatory capture, I can't see how the problem we face is too much oversight on Wall Street.

lukifer11y ago

The counterargument is that regulation hurts small players more than large ones. Citibank can afford an army of compliance officers; most of us can't.

I'm generally pro-regulation, if the details are sensible, but regulatory capture is a real problem, and it is not an unreasonable stance that the cure is sometimes worse than the disease.

chc11y ago

wpietri11y ago

wyager11y ago

karl_gluck11y ago

The argument is actually fairly simple: behaviors that have been known to cause fraudulent or deceptive activity in the past are placed under more scrutiny or outright banned.

For example, it becomes quite easy to hide fraud when a single entity is both an investment bank and a mortgage lender.

pyoung11y ago

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tvhiggins11y ago

chc11y ago

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