Regulation has it's place in the market, so long as its primary purpose is to prevent excess and panic and limit speculative instruments. A bank makes it's primary money by lending it's deposits out at a higher rate than it is paying depositors. I am VERY leary of allowing any financial entity that trades on top of those loans. The loans should be the ONLY financial instrument. No "mortgage backed securities". No secondary market in debt sales.
Daily trading limits. In commodities you also restrict the number of contracts so as to never have more than 10-15% of the total contract base being speculative. Basically enough to ensure liquidity and no more. This largely removes much volatility in the market by keeping a curb on raw speculation and making traders "sleep on it".
The days of complicated secondary trading instruments on Wall St is over. Investment houses are going to have to make money the old fashion way....good returns on basic investment, and fees.
And as much as I hate limiting executive pay, we are going to see a movement to pretty much eliminate or highly limit what boards can offer executives when their companies are losing money and probably nix a vast swath of parachutes. Executive pay has got to be wratcheted back to a more normal global and historical level of 25-50 times the average worker, not 275+.
And finally strict rules on loan qualifications and an end to marketing gimmicks like teaser rates and complex baloons. You charge the individual what his credit rating dictates, right up front and make them pay down whatever they have to. If the guy warrants a 20% rate, then so bit it. Means a lot of people aren't ever going to get a house, but tough. Get over it.
Until we hit the real bottom of the California real estate market, this crisis will not start to fix itself. Amazing how a new hundred thousand home sales in California and the Sun Belt in the USA has torpedoed the entire global banking system.....It's a panic now, at some time saner minds will take charge, establish the real bottom (if governments let that happen) and then we begin to recover.
I still want to know why the world financial system will be in disarray until the costs for shelter (housing prices) in the US return to bubble-peak levels...?
If the price for fuel, food and beer were to drop 20% in 18 months, everyone would cheer. Why is shelter so different? Why does more affordable housing suck?
-Joe
Last edited: