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Was the genie ever in the bottle? That's not a rhetoric question. I generally wonder whether Finance has been consider to be anything other than self-serving.

by werrett 16y ago

nl 16y ago
I generally wonder whether Finance has been consider to be anything other than self-serving No it hasn't. But there have been times (eg, post WW2 to Regan-era) and places where regulation has shaped the market in such a way that financial players interests were more aligned with society as a whole.
- anamax 16y ago
  > But there have been times (eg, post WW2 to Regan-era) and places where regulation has shaped the market in such a way that financial players interests were more aligned with society as a whole. How about some evidence? Be careful of correlation vs causation. Heck - be careful about correlation. (Consider fees for stock purchase.) Note that inflation had some effect. The dollar threshold for "accredited investor" was constant for a long time, but $200k/year in income and $1M in "not-residence" investments became more common. As a result, more folks could be angels.
  - nl 16y ago
    How about some evidence? Fair call. I suspect we are talking about different things, though. I'm not talking about investment performance at all - more about how the financial sector supports the healthiness of the rest of the economy. Anyway, some evidence that regulation can align the interests of the financial sector with the economy as a whole: For example, Australia has quite strong financial regulation - much, much stronger than in the US and UK. This includes everything from higher ratios of capital-to-loans required by the banks, to stricter laws around mortgages. When the financial crisis hit in 2008, the Australian banks were able to survive very well, which - combined with a government stimulus program and continual growth in China - meant that Australia was the only developed nation that did not fall into recession in 2009. More evidence? * Both sides of politics in Australia are supportive of strong financial regulation * The CIA World Fact book says The Australian financial system remained resilient throughout the financial crisis and Australian banks have rebounded https://www.cia.gov/library/publications/the-world-factbook/geos/as.html https://www.cia.gov/library/publications/the-world-factbook/... * The World Economic Forum says The United Kingdom, buoyed by the relative strength of its banking and non-banking financial activities, claimed the Index's top spot from the US, which slipped to third position behind Australia largely due to poorer financial stability scores and a weakened banking sector. http://www.weforum.org/en/initiatives/gcp/FinancialDevelopmentReport/index.htm http://www.weforum.org/en/initiatives/gcp/FinancialDevelopme... * Australia has four of the only around a dozen AA-rated banks in the world, due in part to a tight regulatory regime and domestic banks' limited exposure to poor-quality loans that were the downfall of many banks globally. Australia has a so-called "four pillars" policy that prevents the four largest banks from merging. That has shielded the four, Australia & New Zealand Banking Group Ltd., National Australia Bank, Commonwealth Bank of Australia, and Westpac Banking Corp., from takeover and allowed them to build up profitable, dominant market positions without the need to delve into riskier lending practices. John Brogden, chief executive of pension and managed funds industry lobby the Investment & Financial Services Association, said the results are a "testament to our deep and liquid markets, supported by Australia's superannuation (pension) and managed funds sectors." Australia has a A$1 trillion-plus retirement savings industry, aided by the introduction of mandatory employer contributions to employee pension funds in the early 1990s. http://wiadomosci.onet.pl/2057316,10,global_crisis_nudges_australia_up_world_financial_sector_ranks,item.html http://wiadomosci.onet.pl/2057316,10,global_crisis_nudges_au...
    - anamax 16y ago
      > For example, Australia has quite strong financial regulation - much, much stronger than in the US and UK. This includes everything from higher ratios of capital-to-loans required by the banks, to stricter laws around mortgages. You don't understand - the loose standards in the US for mortgages came from govt, not banks. > Anyway, some evidence that regulation can align the interests of the financial sector with the economy as a whole: You're assuming that govt is interested in the economy as a whole. I don't know about Australia, so I'll accept your assertion that the Australian govt is concerned about the economy as a whole, but the US govt isn't. And no, the Repubs aren't the worst culprits here. They're largely useless to moderately clueless, but they're not actively hostile.
      - nl 16y ago
        You don't understand - the loose standards in the US for mortgages came from govt, not banks. Yes, I do understand that. In Australia (and in many other places) "sub-prime loans" were not made by banks because they are illegal. There have been occasional attempt by non-bank lenders to bring them in (eg, "low doc loans") but in every case the loopholes that allowed them were closed. You're assuming that govt is interested in the economy as a whole. I don't know about Australia, so I'll accept your assertion that the Australian govt is concerned about the economy as a whole, but the US govt isn't. That's quite a bold statement! How about some evidence? ;)
        anamax 16y ago
        >> You're assuming that govt is interested in the economy as a whole. I don't know about Australia, so I'll accept your assertion that the Australian govt is concerned about the economy as a whole, but the US govt isn't. > That's quite a bold statement! How about some evidence? ;) You quoted one bit "You don't understand - the loose standards in the US for mortgages came from govt, not banks." Another is regulatory "encouragement" for banks to hold fannie and freddie stock; that put them all at risk.
  - nl 16y ago
    From the article linked in the original post: They helped distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture. http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom/index6.html http://www.portfolio.com/news-markets/national-news/portfoli... That's the real problem, and that is where proper regulation can help.
    - anamax 16y ago
      > That's the real problem, and that is where proper regulation can help. And where improper regulation can make things worse. Given recent history, what's more likely? You don't get to assume that unicorns will appear this time when talking about a situation in which ogres have been the status quo.
      - nl 16y ago
        Elsewhere in the world it's worked fine. From my point of view recent history seems to show the current approach in the US doesn't work. I'd be interested to hear how less regulation would have avoided the sub-prime financial crisis?
        anamax 16y ago
        > I'd be interested to hear how less regulation would have avoided the sub-prime financial crisis? If we hadn't had the regulations that "encouraged" banks to do subprime mortgages, they wouldn't have been as common. If regulators hadn't invented risk-free securitization (via insurance).... If regulators hadn't "encouraged" banks to hold fannie and freddie stock (through tax policy and declaring it to be risk-free)....

Was the genie ever in the bottle? That's not a rhetoric question. I generally wonder whether Finance has been consider to be anything other than self-serving.

by werrett 16y ago

Was the genie ever in the bottle? That's not a rhetoric question. I generally wonder whether Finance has been consider to be anything other than self-serving.

nl 16y ago

I generally wonder whether Finance has been consider to be anything other than self-serving No it hasn't. But there have been times (eg, post WW2 to Regan-era) and places where regulation has shaped the market in such a way that financial players interests were more aligned with society as a whole.

anamax 16y ago
> But there have been times (eg, post WW2 to Regan-era) and places where regulation has shaped the market in such a way that financial players interests were more aligned with society as a whole. How about some evidence? Be careful of correlation vs causation. Heck - be careful about correlation. (Consider fees for stock purchase.) Note that inflation had some effect. The dollar threshold for "accredited investor" was constant for a long time, but $200k/year in income and $1M in "not-residence" investments became more common. As a result, more folks could be angels.
- nl 16y ago
  How about some evidence? Fair call. I suspect we are talking about different things, though. I'm not talking about investment performance at all - more about how the financial sector supports the healthiness of the rest of the economy. Anyway, some evidence that regulation can align the interests of the financial sector with the economy as a whole: For example, Australia has quite strong financial regulation - much, much stronger than in the US and UK. This includes everything from higher ratios of capital-to-loans required by the banks, to stricter laws around mortgages. When the financial crisis hit in 2008, the Australian banks were able to survive very well, which - combined with a government stimulus program and continual growth in China - meant that Australia was the only developed nation that did not fall into recession in 2009. More evidence? * Both sides of politics in Australia are supportive of strong financial regulation * The CIA World Fact book says The Australian financial system remained resilient throughout the financial crisis and Australian banks have rebounded https://www.cia.gov/library/publications/the-world-factbook/geos/as.html https://www.cia.gov/library/publications/the-world-factbook/... * The World Economic Forum says The United Kingdom, buoyed by the relative strength of its banking and non-banking financial activities, claimed the Index's top spot from the US, which slipped to third position behind Australia largely due to poorer financial stability scores and a weakened banking sector. http://www.weforum.org/en/initiatives/gcp/FinancialDevelopmentReport/index.htm http://www.weforum.org/en/initiatives/gcp/FinancialDevelopme... * Australia has four of the only around a dozen AA-rated banks in the world, due in part to a tight regulatory regime and domestic banks' limited exposure to poor-quality loans that were the downfall of many banks globally. Australia has a so-called "four pillars" policy that prevents the four largest banks from merging. That has shielded the four, Australia & New Zealand Banking Group Ltd., National Australia Bank, Commonwealth Bank of Australia, and Westpac Banking Corp., from takeover and allowed them to build up profitable, dominant market positions without the need to delve into riskier lending practices. John Brogden, chief executive of pension and managed funds industry lobby the Investment & Financial Services Association, said the results are a "testament to our deep and liquid markets, supported by Australia's superannuation (pension) and managed funds sectors." Australia has a A$1 trillion-plus retirement savings industry, aided by the introduction of mandatory employer contributions to employee pension funds in the early 1990s. http://wiadomosci.onet.pl/2057316,10,global_crisis_nudges_australia_up_world_financial_sector_ranks,item.html http://wiadomosci.onet.pl/2057316,10,global_crisis_nudges_au...
  - anamax 16y ago
    > For example, Australia has quite strong financial regulation - much, much stronger than in the US and UK. This includes everything from higher ratios of capital-to-loans required by the banks, to stricter laws around mortgages. You don't understand - the loose standards in the US for mortgages came from govt, not banks. > Anyway, some evidence that regulation can align the interests of the financial sector with the economy as a whole: You're assuming that govt is interested in the economy as a whole. I don't know about Australia, so I'll accept your assertion that the Australian govt is concerned about the economy as a whole, but the US govt isn't. And no, the Repubs aren't the worst culprits here. They're largely useless to moderately clueless, but they're not actively hostile.
    - nl 16y ago
      You don't understand - the loose standards in the US for mortgages came from govt, not banks. Yes, I do understand that. In Australia (and in many other places) "sub-prime loans" were not made by banks because they are illegal. There have been occasional attempt by non-bank lenders to bring them in (eg, "low doc loans") but in every case the loopholes that allowed them were closed. You're assuming that govt is interested in the economy as a whole. I don't know about Australia, so I'll accept your assertion that the Australian govt is concerned about the economy as a whole, but the US govt isn't. That's quite a bold statement! How about some evidence? ;)
      - anamax 16y ago
        >> You're assuming that govt is interested in the economy as a whole. I don't know about Australia, so I'll accept your assertion that the Australian govt is concerned about the economy as a whole, but the US govt isn't. > That's quite a bold statement! How about some evidence? ;) You quoted one bit "You don't understand - the loose standards in the US for mortgages came from govt, not banks." Another is regulatory "encouragement" for banks to hold fannie and freddie stock; that put them all at risk.
- nl 16y ago
  From the article linked in the original post: They helped distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture. http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom/index6.html http://www.portfolio.com/news-markets/national-news/portfoli... That's the real problem, and that is where proper regulation can help.
  - anamax 16y ago
    > That's the real problem, and that is where proper regulation can help. And where improper regulation can make things worse. Given recent history, what's more likely? You don't get to assume that unicorns will appear this time when talking about a situation in which ogres have been the status quo.
    - nl 16y ago
      Elsewhere in the world it's worked fine. From my point of view recent history seems to show the current approach in the US doesn't work. I'd be interested to hear how less regulation would have avoided the sub-prime financial crisis?
      - anamax 16y ago
        > I'd be interested to hear how less regulation would have avoided the sub-prime financial crisis? If we hadn't had the regulations that "encouraged" banks to do subprime mortgages, they wouldn't have been as common. If regulators hadn't invented risk-free securitization (via insurance).... If regulators hadn't "encouraged" banks to hold fannie and freddie stock (through tax policy and declaring it to be risk-free)....