4 April, 2009
‘History is littered with post-crisis regulations. If there are undue restrictions on the operations of businesses, they may view it to be their job to get around them, and you sow the seeds of the next crisis.’ — Liz Ann Sonders, chief investment analyst, CharlesSchwab & Co., a leading US provider of investment services.
And so it goes. Corporations, whether financial or not, strive to maximize profit as inevitably as water seeks its own level. We’ve been trying to ‘regulate’ them since the 19th century. Or is it the 18th? Nothing helps for long. You close one loophole and the slime oozes out of another hole. Wall Street has not only an army of lawyers and accountants, but a horde of mathematicians with advanced degrees searching for the perfect equations to separate people from their money. After all the stimulus money has come and gone, after all the speeches by our leaders condemning greed and swearing to reforms, after the last congressional hearing deploring the corporate executives to their faces, the boys of Wall Street, shrugging off a few bruises, will resume churning out their assortment of financial entities, documents, and packages that go by names like hedge funds, derivatives, collateralized debt obligations, index funds, credit default swaps, structured investment vehicles, subprime mortgages, and many other pieces of paper with exotic names, for which, it must be kept in mind, there had been no public need or strident demand. Speculation, bonuses, and scotch will flow again, and the boys will be all the wiser, perhaps shaken a bit that they’re so reviled, but knowing better now what to flaunt and what to disguise.