“Many of the costs and benefits of financial regulation simply cannot be quantified. How do you quantify the human costs that all the economic wreckage has inflicted? Searching and not being able to find work for years…lost retirements, educations and dreams. How do you quantify that? You don’t.”
“Everyone in the industry claimed this couldn’t happen again, but if the money really is missing, then it’s like a repeat of MF Global. Anyone who thought things don’t need to change, well, have to reappraise their position,”
Here’s a clever idea.
Let’s start a bank. It will take deposits, promising to pay them back on demand. It will use the money to make short-term loans to borrowers it thinks are safe. If too many depositors want their money back quickly, it will sell the loans to somebody else, for face value.
Our bank will not keep reserves on hand to deal with what would happen if any of our borrowers failed to repay their loans. Keeping such reserves, you see, would be far too costly, and reduce the rates we could pay to our depositors.
Nor would we be willing to tell our depositors that they might not have instant access to their funds. That might scare the depositors away. We won’t pay fees for deposit insurance, but we hope our customers will assume that the government will protect them anyway if we fail.
That whole idea sounds crazy, but in fact we already have such banks. They are called money market funds, and they have $2.5 trillion in assets.”
Do you think a part of Wall Street should be able to regulate itself? In case you have any doubts about how bad of an idea this is, POGO’s Michael Smallberg will explain what is wrong with self regulatory organizations.
Get involved and tell Congress not to let Wall Street police itself.