Rating: +0
Role of Regulatory Bodies to prevent the Collapse of Investment Banks; Capability of regulatory authorites to regulate the complex global borderless financial markets with more and more complex financial instuments;
Global regulatory body vs. Country level ones; How can global regulatory bodies be created? What would be the challenges and what needs to be done to make them effective?
A comparison is the creation of UNO/World Bank - an aftermath of WW II.
We are way over-regulated as it stands today, the government is much to involved in the everyday business of most corporations, to the point that the costs makes managing certain accounting aspects of a business just to cost prohibitive. And the unfortunate reality is that most of today's regulations are poorly written and while intended to provide over-sight and transparency they still manage to leave the Fox guarding the proverbial Hen house. Case in point, Sarbanes-Oxley, enacted in 2002 after the Enron scandal, yet today in 2008, 6 years later we are experiencing a huge financial crisis, what happened to all of the financial transparency and checks and balances put in place by SOX?
I have personally sat in front of business persons presenting alternatives and costs associated with technology required to meet a particular regulatory requirement, and have received answers to the effect of “take it out of the budget for now, I’d rather pay the fine” I do admit that this was pre-Enron and Anderson, where no one considered the financial impact of negative PR associated with trivial fines - but the point, is that the most regulations, at least in the financial services community are ancient, and newer ones do not contain either the over-sight or more specifically the “bite” to make them effective.
American businesses are no longer just American businesses, and visa-versa non-US business entities do not exist, the economy and major corporations are in fact global. And as AIG needed a bailout from the US Government due to the tremendous exposure to the overall US economy, over the next decade we will see the same with the negative effect being upon the “global” economy, who owns the bail-out on that one will be interesting. However, it does point to another more global level of over-sight in the making, probably more partnering of various bodies from different nations to start, and then the formation of another 'mildly' effective global baby-sitter.
My vote is for less over-sight, a tightening up of what's already in place, beefed up sanctions with no wiggle room where no amount of money spent on legal counsel will save the guilty, a real review and fixing of whistle blower rules, let's face it for all of the pernicious loans at Countrywide and all of the piece of crap mortgage backed securities packaged and sold and re-sold by the investment banks, there had to be only about a zillion people who knew what was happening with full knowledge that you just can't turn shit into gold, yet they tried and went forward with lies and deceit. For the life of me, I can't believe that everyone involved was a true miscreant, where were all of the honest blokes? You want to know, where - they became part of the “hear no evil, speak no evil and say no evil” crusaders within the American corporations - and why, because there is no protection for stepping up and doing the right thing. US Law makers, fix this on a worldwide basis!
And finally more personal accountability in American business will solve not all, but most ills.
Good Luck,
Peter
October 2008