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New Regulations Coming
Old 10-06-2008, 04:09 AM   #1
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New Regulations Coming

What types of regulatory changes do you think will come out of the financial mess?

I am thinking that speculation with nothing down will be limited. Plus many of those CDS will be regulated.

It is surprising how many CDS are out there with no reserves to cover them.

It appears that the investment banks were selling the MBS and because investors were concerned... they were sold a CDS also. Then the speculators picked up on the CDS and bought them also.

I would like to know if the people creating and selling those MBS (the people working in the investment banks) were buying CDS (like a short) because they knew it would fall to pieces.


I also wonder if the CEO and CFO of those companies should go to jail under SOX for misrepresenting the financial reports of those companies. If they did not adequately reflect the risk... why shouldn't they go to jail. They may have followed the accounting pratices, but they defied the spirit of the law for SOX... do not deceive investors.
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Old 10-06-2008, 06:58 AM   #2
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At the rate we are falling (look at Asian markets last night and US futures this morning) there may be a LOT less to regulate. This is getting pretty bad for many.
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Old 10-06-2008, 07:57 AM   #3
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If this is the episode I heard this weekend - it is a good one as to what could happen, why no regulation etc.

Here is the problem. Regulation might be put in place to address the issues that caused the current problems. It won't address the next causes of the next financial crisis. See the savings and loan issues of the 80s

These financial issues are like a force of nature - a hurricane - you know you live in an area where they hit, they will happen, you just don't know when or how bad it will be.
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Old 10-06-2008, 08:14 AM   #4
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they need to make the IMF or the World Bank a world lender of last resort because now the Europeans are the cause of the problems.
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Old 10-06-2008, 08:26 AM   #5
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Quote:
Originally Posted by dex View Post
Here is the problem. Regulation might be put in place to address the issues that caused the current problems. It won't address the next causes of the next financial crisis. See the savings and loan issues of the 80s
That's not quite true. There was a lot of financial DEregulation over the last 10 years and lack of enforcement of the remaining regulations in recent history. Somehow the big wigs didn't think they were needed any more - must have been some kind of "new era" thinking. It's very likely that the current crisis would have been much much smaller, or even avoided altogether if some regulations hadn't been removed and the few remaining properly enforced.

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Old 10-06-2008, 08:27 AM   #6
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Old 10-06-2008, 08:38 AM   #7
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I would think that CDS's should be regulated very similiar to regular insurance. Making a promise to pay without the ability to pay is fraud and should not be allowed.
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Old 10-06-2008, 08:42 AM   #8
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Making a promise to pay without the ability to pay is fraud and should not be allowed.
It's not fraud without intent to defraud, or at the very least without gross negligence or gross recklessness.

Otherwise, everyone who ever went bankrupt would be guilty of fraud.
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Old 10-06-2008, 08:43 AM   #9
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You'd think that when Buffett called CDSs "weapons of mass financial destruction" years ago, someone would sit up and listen!

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Old 10-06-2008, 11:17 AM   #10
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Let me rephrase--

Selling insurance without reasonable expectation of being able to pay in most situations is fraud. It's why we require insurance companies to hold reserves. Selling CDS's should require those same reserves.


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It's not fraud without intent to defraud, or at the very least without gross negligence or gross recklessness.

Otherwise, everyone who ever went bankrupt would be guilty of fraud.
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