Alan Greenspan Advocates for Common Sense Investment Regulation
One of the culprits being blamed for the global financial crisis is lack of reasonable and common sense regulation. In the Wall Street Journal, Alan Greenspan wrote about what needs to happen, going forward, if we are expected to see any changes going forward. We clearly need some advice, and following his mea culpa last fall, Greenspan appears to be trying to show that he has learned from some of his mistakes in the past.
The idea is to create a situation in which these problems are not allowed to fester — and to create a balance between too much government interference in the markets and not enough oversight. Clearly, risk still needs to be available, but more managed risk and less greediness is needed. Stock Market Funding reports on Greenspan’s assertions:
Adequate capital and collateral requirements can address the weaknesses that the crisis has unearthed. Such requirements will not be overly intrusive, and thus will not interfere unduly in private-sector business decisions. …
Our challenge in the months ahead will be to install a regulatory regime that will ensure responsible risk management on the part of financial institutions, while encouraging them to continue taking the risks necessary and inherent in any successful market economy.
Clearly, the way forward involves more transparency on the part of companies to adequately represent themselves and the fundamentals of their companies. It also requires that the risks of investments — not to mention how their value is derived — should be somewhat more transparent.
Over-regulation should be avoided, of course, but at the same time reasonable requirements need to be made and enforced. The government can ensure that some of the recent shenanegins not continue, while staying largely out of the way. It is a delicate balancing act, but if we have people of common sense, it should be doable.
In the meantime, though, it appears that the government is prepared to do what it takes to prop up Wall Street. This is providing some measure of confidence, and today’s stock market appears to be trying to build on yesterday’s rallying succes in response to some positive news from Citi and from the tech sector.
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March 13th, 2009 at 9:41 am
[…] Now, honestly, I don’t think it’s quite that bad. I stil think that, overall, as long as you make reasonably good investments and hold on to them, eventually you’ll end up ahead. I think that when this stock market problem is over and things start looking up again, my retirement account will recover. And it will recover nicely. But that doesn’t mean that I’m happy about the way Wall Street has been working — nor am I happy about the way the government and the mainstream media have been complicit. It is rather sickening. Going forward, I hope that we listen to what Alan Greenspan is saying now about sensible and effective government regulation. […]