4 ms·

The system protects investors who were lied to. Yes that includes lies that are a bit obvious, but the result is a very, very healthy investment economy in the

The system protects investors who were lied to. Yes that includes lies that are a bit obvious, but the result is a very, very healthy investment economy in the US. Investing is safer from flat-out fraud in the US, and that makes for more investment.

AlbertCory 5y ago
Correct. You don't want to reward the people who are exceptionally good liars, like Madoff: the ones who can con those who normally can't be conned. There are actually people who believe a message that their Social Security number has been compromised, and they have to pay money to avoid going to prison. The stupid deserve fraud protection, too.
aeturnum 5y ago
> the result is a very, very healthy investment economy in the US. There were some recent examples of this system creating perverse incentives for US investments that are worth considering. For instance, the repackaging of mortgage-backed securities in the 2007 financial crisis took advantage of multiple transfers to place all risks on consumers and allow brokers to evade nearly all risk. I think that we need to think very carefully about what risks we protect against (and how) to avoid situations where middle-men capture down-side protections as alpha and gain an incentive to seek out investments that are priced lower because they will often fail. A model that imagines an investment market where the only two parties are the investment originator and the final owner are too simplistic now.
- AlbertCory 5y ago
  Absolutely. Privatizing the profit and socializing the risk is the wrong model.
zucker42 5y ago
Protecting investors from being lied to incentivizes investors to spend less resources on discerning whether representations made to them are true. "More investment" isn't a definite good if it leads to investment in the wrong places.

4 ms·

The system protects investors who were lied to. Yes that includes lies that are a bit obvious, but the result is a very, very healthy investment economy in the

by lallysingh 5y ago

AlbertCory 5y ago
Correct. You don't want to reward the people who are exceptionally good liars, like Madoff: the ones who can con those who normally can't be conned. There are actually people who believe a message that their Social Security number has been compromised, and they have to pay money to avoid going to prison. The stupid deserve fraud protection, too.
aeturnum 5y ago
> the result is a very, very healthy investment economy in the US. There were some recent examples of this system creating perverse incentives for US investments that are worth considering. For instance, the repackaging of mortgage-backed securities in the 2007 financial crisis took advantage of multiple transfers to place all risks on consumers and allow brokers to evade nearly all risk. I think that we need to think very carefully about what risks we protect against (and how) to avoid situations where middle-men capture down-side protections as alpha and gain an incentive to seek out investments that are priced lower because they will often fail. A model that imagines an investment market where the only two parties are the investment originator and the final owner are too simplistic now.
- AlbertCory 5y ago
  Absolutely. Privatizing the profit and socializing the risk is the wrong model.
zucker42 5y ago
Protecting investors from being lied to incentivizes investors to spend less resources on discerning whether representations made to them are true. "More investment" isn't a definite good if it leads to investment in the wrong places.