Indeed.
So my head was spun as I look at these two news stories, wondering if they’ve got it right or if it is just a case of the left throwing enough of their friends against the wall that the shit has finally stuck?
Regulators meeting in Switzerland agree on new global rules to strengthen banks
Regulators meeting in Basel, Switzerland, on Sunday agreed to take new steps to immunize the financial system from the sort of crisis that pushed the world into recession two years ago.
The new rules would make banks roughly double the amount of capital set aside as a buffer against possible losses, slash stockholder dividends and executive pay if that stockpile falls short, and limit lending during economic boom times.
Just to put it out front, I’m not a fan of the second half of this idea. Let the banks lend when they want. Otherwise, they may as well have government managers.
Secondly, as I understand it, the regulations currently let banks lend on a 10% margin: If they have $1,000,000 in cash they can lend $10,000,000. The rest is unofficially covered by the government (in the form of bailouts). This is stupid. While I believe it should be a 100% margin, I’m willing to let them slide by with only 50%. This latest idea pushes them up to nearly 20%.
Any percent bigger than 10% is a good idea in my book.
SEC threatens credit ratings agencies with fraud charges
The Securities and Exchange Commission has declined to seek fraud charges against Moody’s Investors Services over its ratings of risky investments that led to the financial crisis.
But the SEC said it decided against seeking civil charges only because it determined it lacked authority to charge a foreign affiliate of Moody’s.
Instead, in a report on its investigation, the SEC warned all credit rating agencies that they could face charges if they mislead investors with deceptive ratings.
I honestly wish them good luck in proving any of that. The companies are there for a single reason: To rate the risks involved in an investment. If they betray that reason they need to be liquidated and someone new put there.
It’s not personal. It’s business.
IIRC, the problems with the ratings agencies started when the .gov began REQUIRING that all debt instruments be rated by a ‘.gov approved’ rating agency. I think this was Sarbanes-Oxley, but I’m not 100% on that.
What this did was reverse the customer base of the rating agencies. Whereas before, the raters worked for the buyers of debt, and their stock in trade was the accuracy of their ratings (because if their forecasts sucked, nobody would buy their services), now the raters were working for the issuers of the debt. And the incentive shifted to where giving the rosiest forecast got you the most customers.
But big .gov types don’t understand incentives, they only understand compulsion. So instead of putting things back the way they were, they issue edicts and threaten punishment for non-compliance.
I suggest you take a gander at a website called the mrket ticker. The writer there does a really good job of explaining what happened with the banks.