Comments on: "How to Police Wall Street" http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street.html Sun, 22 Nov 2009 21:35:21 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Harmso http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street.html#comment-6628 Harmso Thu, 10 Apr 2008 09:15:00 +0000 http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street/#comment-6628 I have to say I am not really familiar with the role of censure in American History. But I will definitely look that up. From my memory I recall that there where some important distinctions however between public censure and the hypothetical system, which Mr. Kidder kindly put to discussion in this post. <br/><br/>I absolutely agree to Mr. Kidder that if someone gets aware of a wrong around him he should do everything possible to right it. I mean that is the basis of every real democratic society.<br/><br/>In my humble opinion it becomes extremely dangerous however, when you start REWARDING such behaviour. And I think that is also the biggest difference to the American system of public censure, the kind anonymous commentator referred to. History has shown that if you link “a duty to report” with rewards, it pushes that nasty part of human nature to the top that will lead to snitching and spying in the end. An evil combination of curiosity, jealousy, distrust and schadenfreude combined with the self-delusion of serving a common good. That is just the way humans are. Everywhere. <br/><br/>And I absolutely understand that you want to limit such a system to financial institutions. But beware social dynamics and the workings of governments. If you start implementing something like this in a small part of the society – even in a curbed form - there will be no barriers to implement it more generally.<br/><br/>-Georg I have to say I am not really familiar with the role of censure in American History. But I will definitely look that up. From my memory I recall that there where some important distinctions however between public censure and the hypothetical system, which Mr. Kidder kindly put to discussion in this post.

I absolutely agree to Mr. Kidder that if someone gets aware of a wrong around him he should do everything possible to right it. I mean that is the basis of every real democratic society.

In my humble opinion it becomes extremely dangerous however, when you start REWARDING such behaviour. And I think that is also the biggest difference to the American system of public censure, the kind anonymous commentator referred to. History has shown that if you link “a duty to report” with rewards, it pushes that nasty part of human nature to the top that will lead to snitching and spying in the end. An evil combination of curiosity, jealousy, distrust and schadenfreude combined with the self-delusion of serving a common good. That is just the way humans are. Everywhere.

And I absolutely understand that you want to limit such a system to financial institutions. But beware social dynamics and the workings of governments. If you start implementing something like this in a small part of the society – even in a curbed form – there will be no barriers to implement it more generally.

-Georg

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street.html#comment-6622 Anonymous Thu, 10 Apr 2008 02:22:00 +0000 http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street/#comment-6622 I am at a loss as to why the federal government should continue to give brokers access to taxpayer money with out a return on investment? Why should the corporate officers of these bankrupt corporations continue to draw their high salaries and bonuses?<br/><br/>Before Wall Street can continue with business as usual Wall Street must first come to grips with the fact they have a financial obligation the American taxpayers. As of today all I’ve be able to surmise is that the bail out was an obligation that the American people should be grateful to shoulder. I am at a loss as to why the federal government should continue to give brokers access to taxpayer money with out a return on investment? Why should the corporate officers of these bankrupt corporations continue to draw their high salaries and bonuses?

Before Wall Street can continue with business as usual Wall Street must first come to grips with the fact they have a financial obligation the American taxpayers. As of today all I’ve be able to surmise is that the bail out was an obligation that the American people should be grateful to shoulder.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street.html#comment-6618 Anonymous Wed, 09 Apr 2008 21:16:00 +0000 http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street/#comment-6618 In general I like this idea of returning public censure as a means of enforcement. The gentleman with E. German experience may not be aware of the role of such censure in American history.<br/>I would greatly strengthen the privacy of the whistle blower, even from lawsuits. I trust that the firms targeted will try to blackball the whistleblower. In general such a group will need some quasi-governmental status and support. Obviously connected to the Fed. In general I like this idea of returning public censure as a means of enforcement. The gentleman with E. German experience may not be aware of the role of such censure in American history.
I would greatly strengthen the privacy of the whistle blower, even from lawsuits. I trust that the firms targeted will try to blackball the whistleblower. In general such a group will need some quasi-governmental status and support. Obviously connected to the Fed.

]]> By: William Kidder http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street.html#comment-6612 William Kidder Wed, 09 Apr 2008 18:36:00 +0000 http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street/#comment-6612 Kidder responds: I am a civil libertian, so of course I agree that snitching and spying on one's fellow citizens is horrible. But in this case, we are talking about self-regulation of Wall Street firms which are treated as TOO BIG TO FAIL and not talking about society at large.<br/><br/>Question: What is one's duty to report law-breaking in general? A tough one. But more relevant to today's problem, what is the duty of an employe to report of a workplace violation occurring in a self-regulated industry? <br/><br/>I argue that 'self' in self-regulatory extends to all employees, not just the legal or compliance departments. Moreover, under the proposal, all parties know in advance that violations can and should be reported. So is a violation report really snitching? <br/><br/>Further, the plan envisions the entire industry has a huge financial stake in avoiding a bailouts or claims. Everybody has to work to weed out the problems in order to get back most of the premiums paid to the insurance company. Also, the plan builds counterparty trust -- which has gone missing and become a major problem that cosmetic changes can't fix.<br/><br/>Think of the adage 'it takes one to know one'. By setting up a mechanism for regulators to tap into the Street grapevine and knowledge, the regulators will have an edge missing now. For example, did you ever think the Fed was sharp enough to keep up with Bear Stearns? Of course not. Kidder responds: I am a civil libertian, so of course I agree that snitching and spying on one’s fellow citizens is horrible. But in this case, we are talking about self-regulation of Wall Street firms which are treated as TOO BIG TO FAIL and not talking about society at large.

Question: What is one’s duty to report law-breaking in general? A tough one. But more relevant to today’s problem, what is the duty of an employe to report of a workplace violation occurring in a self-regulated industry?

I argue that ’self’ in self-regulatory extends to all employees, not just the legal or compliance departments. Moreover, under the proposal, all parties know in advance that violations can and should be reported. So is a violation report really snitching?

Further, the plan envisions the entire industry has a huge financial stake in avoiding a bailouts or claims. Everybody has to work to weed out the problems in order to get back most of the premiums paid to the insurance company. Also, the plan builds counterparty trust — which has gone missing and become a major problem that cosmetic changes can’t fix.

Think of the adage ‘it takes one to know one’. By setting up a mechanism for regulators to tap into the Street grapevine and knowledge, the regulators will have an edge missing now. For example, did you ever think the Fed was sharp enough to keep up with Bear Stearns? Of course not.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street.html#comment-6606 Anonymous Wed, 09 Apr 2008 16:45:00 +0000 http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street/#comment-6606 For one not of the libertarian religion, is there a clear and cogent argument from the facts why 'private' regulation (??) is a useful innovation? (I don't regard 'govt reg is always inefficient or distorting' as a clear and cogent argument - it's rhetoric.)<br/><br/>Above we have an example of East German uses of citizens spying on one another.<br/><br/>Are there real world good examples of regulations of this type working in the financial industry? Any strong argument for such a 'private' regulatory system should have this as part of the foundation.<br/><br/>It seems to me that since the enforcement mechanism is the Fed, the notion this is private is specious anyway. If you disagree, on what grounds? For one not of the libertarian religion, is there a clear and cogent argument from the facts why ‘private’ regulation (??) is a useful innovation? (I don’t regard ‘govt reg is always inefficient or distorting’ as a clear and cogent argument – it’s rhetoric.)

Above we have an example of East German uses of citizens spying on one another.

Are there real world good examples of regulations of this type working in the financial industry? Any strong argument for such a ‘private’ regulatory system should have this as part of the foundation.

It seems to me that since the enforcement mechanism is the Fed, the notion this is private is specious anyway. If you disagree, on what grounds?

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street.html#comment-6602 Anonymous Wed, 09 Apr 2008 16:30:00 +0000 http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street/#comment-6602 Can anyone explain why this is necessary: "4) No more netting of trades unless settlement date is within 30 calendar days."? Can anyone explain why this is necessary: “4) No more netting of trades unless settlement date is within 30 calendar days.”?

]]> By: Richard Kline http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street.html#comment-6588 Richard Kline Wed, 09 Apr 2008 08:43:00 +0000 http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street/#comment-6588 *boof* TAF in December, 07 *boof* TAF in December, 07

]]> By: Richard Kline http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street.html#comment-6587 Richard Kline Wed, 09 Apr 2008 08:41:00 +0000 http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street/#comment-6587 I'm all for accomplishing Kidder's 1-4: These are the minimum reasonable floor boards to fair practice reforms in the industry. And his insight that the Fed's announced willingness to _withhold_ repos from non-participants is cogent. Since the bid totals for the TAR in December, '07, it's been evident that Fed credit is the only thing keeping many financial concerns simulating lifelike activity. A threat to cut them off would be bracing indeed. . . . Course this Fed doesn't have gut one to actually cut off or constrain anyone, but maybe they wouldn't have to with this proposal.<br/><br/>I'm dead against a private Good Citizen outfit, though. It's clear that William Kidder wants to keep _public_ regulation to a minimum. There are good reasons for that perspective, I don't mean to denigrate it. I would see such an outfit being _massively ripe for exploitation_. We see what happened with private bond raters who had a stake in the outcome. Yes, this proposal is intended to rebalance the stake of the 'examiners.' I would much prefer public employees who face severe statutory penalties for misfeasance or nonfeasance as well as rich incentives for productive result. The industry can always find a way to provide richer incentives for laxity. <br/><br/>Good effort, though. I’m all for accomplishing Kidder’s 1-4: These are the minimum reasonable floor boards to fair practice reforms in the industry. And his insight that the Fed’s announced willingness to _withhold_ repos from non-participants is cogent. Since the bid totals for the TAR in December, ‘07, it’s been evident that Fed credit is the only thing keeping many financial concerns simulating lifelike activity. A threat to cut them off would be bracing indeed. . . . Course this Fed doesn’t have gut one to actually cut off or constrain anyone, but maybe they wouldn’t have to with this proposal.

I’m dead against a private Good Citizen outfit, though. It’s clear that William Kidder wants to keep _public_ regulation to a minimum. There are good reasons for that perspective, I don’t mean to denigrate it. I would see such an outfit being _massively ripe for exploitation_. We see what happened with private bond raters who had a stake in the outcome. Yes, this proposal is intended to rebalance the stake of the ‘examiners.’ I would much prefer public employees who face severe statutory penalties for misfeasance or nonfeasance as well as rich incentives for productive result. The industry can always find a way to provide richer incentives for laxity.

Good effort, though.

]]> By: Harmso http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street.html#comment-6586 Harmso Wed, 09 Apr 2008 08:26:00 +0000 http://www.nakedcapitalism.com/2008/04/how-to-police-wall-street/#comment-6586 Sounds alluring.<br/>But believe me when I say, You will never ever want something like this proposed Good Citizen program in a demcratic country.<br/><br/>And I know you will all jump on me when I say this. But it is in the essence of the idea not different to what the Stasi in the German Democratic Repubic did. They used the same kind of argument and it led to a society in which every citizen grassed on its neighbours. You had a country populated by police spys. (I am from Germany. I know what I am talking about)<br/><br/>Maybe I am overreacting but I think you do not want to implement anything like this where a citizen is REWARDED for snitching about another one. Even if it happens only in a small part of the business world this is lethal to any healthy and liveable society. <br/><br/>This is not intended to be any criticism on Mr. Kidder. But this type of enforcement cannot be the solution. You would try to solve one bad in potentially installing an even bigger one. Remember Orwell<br/><br/>-Georg Sounds alluring.
But believe me when I say, You will never ever want something like this proposed Good Citizen program in a demcratic country.

And I know you will all jump on me when I say this. But it is in the essence of the idea not different to what the Stasi in the German Democratic Repubic did. They used the same kind of argument and it led to a society in which every citizen grassed on its neighbours. You had a country populated by police spys. (I am from Germany. I know what I am talking about)

Maybe I am overreacting but I think you do not want to implement anything like this where a citizen is REWARDED for snitching about another one. Even if it happens only in a small part of the business world this is lethal to any healthy and liveable society.

This is not intended to be any criticism on Mr. Kidder. But this type of enforcement cannot be the solution. You would try to solve one bad in potentially installing an even bigger one. Remember Orwell

-Georg

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