Our Financial Markets Are Run by Coke-Crazed Monkeys
Roy Mura reprinted an excellent article by New York State Insurance Commissioner Eric Dinallo in his blog, Coverage Counsel . It's about the current financial crisis and how de-regulation of credit default swaps created a huge bubble of unsecured financial risk that has crippled the U.S. -- and world -- economies.
I agree with Superintendent Dinallo's observations about the need for regulation of the financial markets, and I will add this comment of my own: President John F. Kennedy said, "My father always told me that all businessmen were sons of bitches, but I never believed it till now... They are a bunch of bastards, and I'm saying this on my own now, not just because my father told it to me." He made this statement on 10 April 1962, and it was widely quoted in the press, in reaction to the decision by U.S. Steel to raise its prices right after the steelworkers' union negotiated a modest new contract under pressure from the White House to keep inflation down.
The problem is that uncontrolled markets are regulated only by the amount of greed and dishonesty that its main players can muster up -- and that amount is virtually unlimited. I am a great believer in capitalism, but in order for capitalism to work, dishonesty must be kept to a minimum. Otherwise, the public can't have faith in the market, and without that faith, the markets are nothing but gambling casinos, which is not what we want, but which, in my view, is basically what we have had for the past 20 years or so, and especially since 2000.
Scientists have done experiments in which monkeys are given unlimited access to cocaine. What the experiments proved is that monkeys will keep snorting coke until they drop dead from an overdose. Our financial markets are controlled by ladies and gentlemen with no more limit on their appetite for money than monkeys have for cocaine. Given free reign, they can -- and have -- killed their own businesses. Yes, killed them. They are only on life support with taxpayer money in the hope of reviving them. And the ripple effect is killing the financial health of honest Americans.
Let's face it: JFK was right. Businessmen are sons of bitches, in that they will, for the most part, do anything they think they can get away with. That applies to lawyers as well. Of course there are exceptions. There are exceptions to everything. But generally, the world's financial markets are run and staffed by the equivalent of cocaine-crazed monkeys, to whom we entrust the country's money.
And make no mistake about it: Bernie Madoff is no one-of-a-kind phenomenon. The financial markets are full of Bernie Madoffs; many whose crimes are on a smaller scale, and many others who just haven't been discovered yet.
There is only one sensible solution: regulation. Real tight regulation. Government auditors should be going over the books of every financial manager on a regular basis. Same for the companies that give ratings to securities.
Every casino has cameras over every game table, and sharp-eyed security people watch for anyone trying to cheat. I know a car dealer in Queens who is so concerned that his salesmen not do any shady dealings with customers, that he has a camera with audio pickup over every salesman's desk -- and a sign advising customers that all discussions are being taped.
The same should be done with every stockbroker, hedge fund manager, investment advisor, and securities trader. Big Brother does need to look over their shoulders, at all times, to keep them honest. Who will keep the regulators honest? Probably not the current crop of politicans. Most of them need to be voted out of office.
Otherwise, the snorting will just go on.