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Old 03-23-2010, 04:09 PM   #41
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I don't support the notion that the answer to whatever problem-of-the-moment that ails us is blindly raising taxes. I'd like to see measurable and sustained accountability in place for the programs we already have, cost-cutting measures to increase efficiency and streamline government, and across- the- board head count reductions to eliminate bloated civil service payrolls first.
I don't support blindly raising taxes at all.
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Would you be opposed to the tax reductions we would enjoy from a more efficient, accountable government?
Absolutely not.
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And the premise that just because you are willing to write a check that I should be forced to write one, too is disingenuous- it's easy for you to to pontificate about writing that check; actually doing so is another matter altogether. Why should my portfolio suffer to make you feel better?
Not so fast with the disingenuous here.. I was willing to pay more when Bush gave me a huge bonus. DW and I were in the 1% that made out like bandits. My view was that those tax cuts would unwind the surplus we had finally built up over the past 5 or 6 years and leave my kids holding the bag. What I find stunning is that most of the people who are now so alarmed at the Bush engendered deficits didn't even benefit from the cuts. They just bought the mantra that cuts are good.

As to your portfolio suffering to make me feel good, the question remains - would financial reform (and the ensuing dip due to spooked financiers) be just a feel good effort? A decade of deregulation and lack of oversight contributed to a collapse that has seriously set back a lot of ER plans. My good faith question is should we leave Wall Street unrestrained and hope it doesn't happen again or are there prudent steps we can take to foster a measure of stability.
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Old 03-23-2010, 04:26 PM   #42
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Some regulatory changes are needed to deal with certain innovations in the markets (CDS) that have cause problems. Plus, there are some entities and types of gambling investing that should have more oversight.


In some cases, the existing regs would be fine if they were followed/enforced. The basic checks and balances investors rely on are not very reliable.

IMO - Handing out stiff prison sentences and disgorging their compensation/bonuses is the answer.
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Old 03-23-2010, 04:31 PM   #43
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Not if you are comparing policies and laws. But you surely can compare them if you are analyzing basic human behavior. Greed and herd mentality are both very strong players in the finance markets. And I would submit that is what causes these crises, not policies and laws. People see what looks to be a profitable way of doing things, and go after it until the area they are exploiting has ballooned out of proportion. Then the balloon pops.

Greed and herd behaviors are both behavioral constants.
I agree. There's a quote (can't remember the author) that illustrates it well: "progress is cumulative in science and engineering, but cyclical in finance."

Read Chancellor's Devil Take the Hindmost, Kindleberger's Manias, Panic and Crashes, Mackay's Extraordinary Popular Delusions and the Madness of Crowds and you can see the similarities in speculative manias that always, always include massive credit expansions followed by the crash - followed by investigations, recriminations and new laws and controls. I can't find my copy of Kindlberger*, but Chancellor goes back to the 1690's in his book and Mackay's book was published in 1852.

Social context changes, technology changes, the "hot thing to have today" changes, but people and their money just keep rolling around in the same pit of mud.

This time it's different? Nope, not even close.

*Googled it: Kindlberger was published in the 1840s and it starts, like Mackay, with the Mississippi Scam in France (1720's).
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Old 03-23-2010, 04:37 PM   #44
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I agree. There's a quote (can't remember the author) that illustrates it well: "progress is cumulative in science and engineering, but cyclical in finance."

Read Chancellor's Devil Take the Hindmost, Kindleberger's Manias, Panic and Crashes, Mackay's Extraordinary Popular Delusions and the Madness of Crowds and you can see the similarities in speculative manias that always, always include massive credit expansions followed by the crash - followed by investigations, recriminations and new laws and controls. I can't find my copy of Kindlberger*, but Chancellor goes back to the 1690's in his book and Mackay's book was published in 1852.

Social context changes, technology changes, the "hot thing to have today" changes, but people and their money just keep rolling around in the same pit of mud.

This times it's different? Nope

*Googled it: Kindlberger was published in the 1840s and it starts, like Mackay, with the Mississippi Scam in France (1720's).
Yep. SSDD. Thats Same Schmidt, Different Day in case ya don't know...
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Old 03-23-2010, 04:43 PM   #45
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Yep. SSDD. Thats Same Schmidt, Different Day in case ya don't know...
Funny, I was sitting here paging through Chancellor's book and found something interesting - especially considering that we're talking about politicians bringing about some form of financial reform.

Chanceller says in his introduction: "On numerous occasions we find politicians stimulating speculative manias for their own gain".

I think we should be very careful about hiring foxes to be consultants on hen house security issues.
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Old 03-23-2010, 04:51 PM   #46
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I don't support blindly raising taxes at all.
Absolutely not.
Not so fast with the disingenuous here.. I was willing to pay more when Bush gave me a huge bonus. DW and I were in the 1% that made out like bandits. My view was that those tax cuts would unwind the surplus we had finally built up over the past 5 or 6 years and leave my kids holding the bag. What I find stunning is that most of the people who are now so alarmed at the Bush engendered deficits didn't even benefit from the cuts. They just bought the mantra that cuts are good.

As to your portfolio suffering to make me feel good, the question remains - would financial reform (and the ensuing dip due to spooked financiers) be just a feel good effort? A decade of deregulation and lack of oversight contributed to a collapse that has seriously set back a lot of ER plans. My good faith question is should we leave Wall Street unrestrained and hope it doesn't happen again or are there prudent steps we can take to foster a measure of stability.
My good faith answer is that Wall Street does need some oversight- starting with an overhaul of the SEC...but not sure why the knee-jerk reaction is that we have to raise taxes and/or take a hit on our portfolios to provide it... Why would anyone assume that new regulations would automatically cost more to implement and enforce, and negatively impact the market? Maybe if they were fair, simpler to understand, and had a few million less loopholes they would actually cost less, stimulate investment and boost investor confidence- the same goes for our ridiculously convoluted tax codes, for example- with a simple, fair and responsible tax structure (flat tax?) we could send half the IRS home to find wealth-producing jobs in the private sector... a double boost to the economy, with resultant positive impact on our portfolios.

I'm more concerned about the costs of runaway government impacting my portfolio than I am Wall Street "shenanigans" .

So, as a show of good faith, are you willing to send your Bush bonus back? As another 1%'er, I'm keeping mine, by the way. It's already invested on the Street..and up 50% over last year..
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Old 03-23-2010, 05:08 PM   #47
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re: the 'invisible hand'







You are correct (or at least I agree with you, maybe we are both wrong ).

Trouble is, the regulators can't smack down the snake-oil salesmen either. Where was the SEC with Bernie Madoff? Why didn't Tim Geitner get audited by the IRS? and on and on....

The snake oil salesmen (and women) can move 1000x faster than those hundreds of people in Congress. The (largest part of) answer is transparency and education.

Why did so many people on this forum express shock at all those who were taken by Madoff? Simple, we are educated enough in basic financial matters to know the warning signs, we would look for more transparency, etc.

Don't get me wrong, I think that some forms of regulation are a good thing and I welcome them. But I really want to see them focus on education and transparency. I just love that old quote - "You can't cheat an honest man." Nah, it's not 100% true, but there is a lot of truth to it.

-ERD50
Yeah, but "no regulation" means the snake-oil salesman sells all the time with impunity and causes havoc and harm. With effective regulation, we cure most of the bad ills. No amount of regulation will perfectly regulate all of the tidal waves of snake-oil ingenuity. But the inability to attain perfect regulation should not be the enemy of good, sensible regulation. Despite Madoff and Ponzi, the investing public is better off with the SEC than not having an SEC. Of course, this should not displace basic norms of caveat emptor that each individual should instill in himself.

When you start citing extreme, and rare cases of regulatory failure like Madoff, it should not mean you throw out the SEC regulatory apparatus that failed to police Madoff because of defective SEC staff judgments; on the other hand, the absence of regulatory oversight, monitoring and enforcement in some very key financial areas does suggest we need to do something and not let the invisible hand guide us.
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Old 03-23-2010, 06:38 PM   #48
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When you start citing extreme, and rare cases of regulatory failure like Madoff, it should not mean you throw out the SEC regulatory apparatus that failed to police Madoff because of defective SEC staff judgments; on the other hand, the absence of regulatory oversight, monitoring and enforcement in some very key financial areas does suggest we need to do something and not let the invisible hand guide us.
Madoff aside, the SEC is a prime example of good government at work. Our entire financial system is based on trust. Without trust, we'd all have our money, or more likely our gold, sealed behind locked doors. We'd only invest with people who we personally know and trust. But because we have financial policemen on the beat we feel comfortable enough with the honesty of our financial system that most of us never actually even see our money. Our trust is so great that we routinely invest with complete strangers - people we've never met, and likely never will. It's a remarkable accomplishment. It wasn't always that way.

In so many ways we've become so accustomed to things working right that we take for granted all of the things that government does that make our lives better, and yes, our economy stronger. Instead we elevate the occasional failures (Madoff) to such large proportions they overshadow all of the good that is done every single day. It isn't a reasoned or well thought out position that says all government and all regulation is bad. But we do seem to hear that view expressed more frequently, and more strongly, these days.
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Old 03-23-2010, 06:48 PM   #49
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Madoff aside, the SEC is a prime example of good government at work. Our entire financial system is based on trust. Without trust, we'd all have our money, or more likely our gold, sealed behind locked doors. We'd only invest with people who we personally know and trust. But because we have financial policemen on the beat we feel comfortable enough with the honesty of our financial system that most of us never actually even see our money. Our trust is so great that we routinely invest our money with complete strangers - people we've never met, and likely never will. It wasn't always that way.

In so many ways we've become so accustomed to things working right that we take for granted all of the things that government does that make our lives better, and yes, our economy stronger. It isn't a reasoned or well thought out position that says all government and all regulation is bad. But we do seem to hear that view expressed more frequently, and more strongly, these days.
I love my government. I just wish it was smaller. And more efficient. And more transparent. And I trusted it more.
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Old 03-23-2010, 07:30 PM   #50
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Too many of these guys get caught after their play has run out on its own - when there are no new suckers to be brought in and the house of cards starts to fall down. If the housing market tanking had not lead to the credit markets and the stock market, Bernie Madoff would still be out there doing his thing.

Marokopolous (sp?) took five whole minutes to figure out that Madoff was running a Ponzi scheme. He gave it to the SEC 3-4 times over a decade, laying it out for them in detail the last time (he did everything but type up the indictment for them) and still they missed him completely. And while Bernie did his best to maintain a low profile, when the SEC finally did investigate they completely ignored concrete evidence that he was lying his ass off. They never bothered to verify how he cleared trades, who was on the other end of any of his trades, swallowed whole a bunch of BS about options that he claimed he was trading, and then ignored evidence that when he allegedly made some of those he trades he did not even have a position in the market. No, instead they gave at least one of the investigating attorneys the highest performance evaluation because of her ability to "understand and analyze the complex issues of the Madoff investigation."

Why didn't the SEC at least comment, if not enforce the requirement for additional reserves, when AIG, FNMA and FHLMC ignored reality, changed their accounting practices, etc. when all of those mortgages and loans started turning bad?

But if you really want to find why you shouldn't feel all warm and fuzzy about the SEC walking the beat on the street, just look at their record on the uptick rule and naked shorts.
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Old 03-23-2010, 07:33 PM   #51
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My good faith answer is that Wall Street does need some oversight- starting with an overhaul of the SEC...but not sure why the knee-jerk reaction is that we have to raise taxes and/or take a hit on our portfolios to provide it... Why would anyone assume that new regulations would automatically cost more to implement and enforce, and negatively impact the market? ....
Aha, I have not been communicating well. I actually agree with you on the above. The hit in our portfolios I am talking about is a drop in the markets when/if Wall Street freaks if the Hill passes a bill that promises effective oversight. In other words, if we do a good job regulating them will the market over-react causing a big drop?

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So, as a show of good faith, are you willing to send your Bush bonus back? As another 1%'er, I'm keeping mine, by the way. It's already invested on the Street..and up 50% over last year..
No, hell no
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Old 03-23-2010, 09:35 PM   #52
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When you start citing extreme, and rare cases of regulatory failure like Madoff, it should not mean you throw out the SEC regulatory apparatus that failed to police Madoff because of defective SEC staff judgments; on the other hand, the absence of regulatory oversight, monitoring and enforcement in some very key financial areas does suggest we need to do something and not let the invisible hand guide us.
My Madoff example had two components to it.

1) The SEC failed to protect anyone.

2) Education and transparency would have protected anyone, regardless off the SEC. The exception would be someone who recognized it was 'too good to be true' but was hoping to get in at the top of the pyramid. I don't care if one crook loses money to another.

That is not a total condemnation of regulation, but the SEC appeared to have failed at their assigned duty. Hey, no one is perfect, we ought to learn and improve. And we better learn to protect ourselves, to the extent we can - and the Madoff investors certainly should have (esp those who had a big % of NW with him).

I'll quote Westernskies here ( I forgot to hit the multi-quote button):

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Why would anyone assume that new regulations would automatically cost more to implement and enforce, and negatively impact the market?
Exactly - doing the job right doesn't automatically mean do more. Sometimes stripping down to the essence allows proper oversight of that which is really important.

I re-read ChrisC and GTG posts - two things I notice is they throw in the straw man of calls for "no regulation" and 'all government and all regulation is bad', and they ignore the idea of personal responsibility. What I'm saying is a combination of those would be more effective than just 'increased regulation'.

-ERD50
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Old 03-23-2010, 10:10 PM   #53
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My Madoff example had two components to it.

1) The SEC failed to protect anyone.

2) Education and transparency would have protected anyone, regardless off the SEC. The exception would be someone who recognized it was 'too good to be true' but was hoping to get in at the top of the pyramid. I don't care if one crook loses money to another.

That is not a total condemnation of regulation, but the SEC appeared to have failed at their assigned duty. Hey, no one is perfect, we ought to learn and improve. And we better learn to protect ourselves, to the extent we can - and the Madoff investors certainly should have (esp those who had a big % of NW with him).

I'll quote Westernskies here ( I forgot to hit the multi-quote button):



Exactly - doing the job right doesn't automatically mean do more. Sometimes stripping down to the essence allows proper oversight of that which is really important.

I re-read ChrisC and GTG posts - two things I notice is they throw in the straw man of calls for "no regulation" and 'all government and all regulation is bad', and they ignore the idea of personal responsibility. What I'm saying is a combination of those would be more effective than just 'increased regulation'.

-ERD50
Well, re-read my posts; I don't discount or ignore personal responsibility; caveat emptor derives from personal responsibility and accountability. Before Madoff, the SEC consistently ranked high in the public and securities industry view as a prudent and reliable regulator; it was cost-effective too, as it is funded primarily by filing and registration fees. Yeah, it blew Madoff, but I doubt you find even the most knowledeable and sophisticated investors not thankful of the public disclosure rules the Agency promulgates for the benefit of investors!
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Old 03-23-2010, 10:33 PM   #54
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Marokopolous (sp?) took five whole minutes to figure out that Madoff was running a Ponzi scheme. He gave it to the SEC 3-4 times over a decade, laying it out for them in detail the last time (he did everything but type up the indictment for them) and still they missed him completely. And while Bernie did his best to maintain a low profile, when the SEC finally did investigate they completely ignored concrete evidence that he was lying his ass off. They never bothered to verify how he cleared trades, who was on the other end of any of his trades, swallowed whole a bunch of BS about options that he claimed he was trading, and then ignored evidence that when he allegedly made some of those he trades he did not even have a position in the market. No, instead they gave at least one of the investigating attorneys the highest performance evaluation because of her ability to "understand and analyze the complex issues of the Madoff investigation."

Why didn't the SEC at least comment, if not enforce the requirement for additional reserves, when AIG, FNMA and FHLMC ignored reality, changed their accounting practices, etc. when all of those mortgages and loans started turning bad?

But if you really want to find why you shouldn't feel all warm and fuzzy about the SEC walking the beat on the street, just look at their record on the uptick rule and naked shorts.
Yes, the SEC can be staffed with people who decide that enforcing regulations are best ignored or slowed down to a bare trickle. It is the president who appoints these folks, and if the president or his advisors believe that financial regulation is bad, then it's just a matter of appointing a top SEC regulator who has that same point of view, sits on his/her hands, and repeals rules that have regulated markets in the past. The SEC is not some independent agency with consistent enforcement and continuity across administrations.

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Old 03-23-2010, 10:34 PM   #55
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Yeah, it blew Madoff, but I doubt you find even the most knowledeable and sophisticated investors not thankful of the public disclosure rules the Agency promulgates for the benefit of investors!
But it isn't one or the other. We can have good regulatory overview, and we should have transparency and educated investors.

We are back to where we started - I don't care how good the regulators are, the snake oil people will find a hole in the system. Transparency helps and education helps where the regulators might fail. I'd like to see increased emphasis put on education and transparency. There is a point where relying on regulators to protect us is just abdicating our own responsibility to the regulators.

It isn't binary - it is all matter of degree.

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Old 03-24-2010, 07:15 AM   #56
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2) Education and transparency would have protected anyone, regardless off the SEC. The exception would be someone who recognized it was 'too good to be true' but was hoping to get in at the top of the pyramid. I don't care if one crook loses money to another.

...doing the job right doesn't automatically mean do more. Sometimes stripping down to the essence allows proper oversight of that which is really important.
Sounds right to me. But transparency will require regulation. Wall Street demanded dark space to run its derivatives market and got it. I am reading The Quants and it is amazing to see how the lack of transparency made it impossible for the hedge fund managers who were causing it to know what was happening in the initial meltdown in August of 2007. All they could do was call their counterparts but the responses were like pocker table conversations - "is it you dumping," "no, not me, must be Goldman."
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Old 03-24-2010, 07:47 AM   #57
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Well, re-read my posts; I don't discount or ignore personal responsibility; caveat emptor derives from personal responsibility and accountability. Before Madoff, the SEC consistently ranked high in the public and securities industry view as a prudent and reliable regulator; it was cost-effective too, as it is funded primarily by filing and registration fees. Yeah, it blew Madoff, but I doubt you find even the most knowledeable and sophisticated investors not thankful of the public disclosure rules the Agency promulgates for the benefit of investors!

The SEC reputation may have been good once but I not sure it was deserved or even true this last decade.

The dot com bubble, with unholy alliance between analyst who were really just shills, and the IPO side of brokerages.
The Enron, and WorldCom accounting and trading scandals.
Eliminating the uptick rule and failure to enforce naked shorts.


These are all example of significant SEC failures. It isn't that we need new regulations but simply enforcing the ones that existing ones would be great new start.


I read Sorkin's To Big to Fail and Cohen's House of Cards. In both books Cox comes across as passive player completely out of his league and competence level. All of the major players are Paulson, Bernake, Geitner, Jamie Dimon, and many others are begging the SEC to do their jobs. The SEC is failing miserably.

Now Elliot Spitzer, may be grandstanding arrogant SOB, as well as a philanderer, but the NY Attorney General office did more to "regulate" Wall St. than the SEC did this last decade.

I think John McCain was right Bush should have fired Cox early on. I also believe that country would be much better off, if we shut down regulating agency that fail miserably, much like Reagan did with the Air Traffic Controllers, and we are doing failing public schools.

Fire everybody and let them the reapply for their jobs. The SEC and the agencies that "regulated" Fannie and Freddie are at the top of my list to get the axe.
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Old 03-24-2010, 08:23 AM   #58
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I read Sorkin's To Big to Fail and Cohen's House of Cards. In both books Cox comes across as passive player completely out of his league and competence level. All of the major players are Paulson, Bernake, Geitner, Jamie Dimon, and many others are begging the SEC to do their jobs. The SEC is failing miserably.
I believe it was stronger than incompetence from Cox. I believe it was a deliberate strategy to make the SEC as weak as possible and slow down enforcement as much as possible.

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Old 03-24-2010, 09:57 AM   #59
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Now Elliot Spitzer, may be grandstanding arrogant SOB, as well as a philanderer, but the NY Attorney General office did more to "regulate" Wall St. than the SEC did this last decade.
Yes, and no. While he did prove market timing was going on by the big mutual fund companies, he used the big fines to get noticed and get elected Governor, so political aspirations were the motive, not "doing what's right".

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I think John McCain was right Bush should have fired Cox early on. I also believe that country would be much better off, if we shut down regulating agency that fail miserably, much like Reagan did with the Air Traffic Controllers, and we are doing failing public schools.
It's a shame noone listens to McCain. He's a whole lot smarter than 99% of the folks in Washington.........
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Old 03-24-2010, 11:16 AM   #60
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Yes, the SEC can be staffed with people who decide that enforcing regulations are best ignored or slowed down to a bare trickle. It is the president who appoints these folks, and if the president or his advisors believe that financial regulation is bad, then it's just a matter of appointing a top SEC regulator who has that same point of view, sits on his/her hands, and repeals rules that have regulated markets in the past. The SEC is not some independent agency with consistent enforcement and continuity across administrations.

Audrey
Funny how that works. You start with an ideological view that regulation is universally bad. You then systematically implement that view by deregulating the system through legislation where you can and elsewhere by lax oversight and enforcement. And then when things fall apart you point to the regulatory failures you enabled as proof that the government is incompetent and then use that claim of incompetence to advocate . . . even less regulation.
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