Building A Better Steel Cage

Whenever there is a financial crisis, there soon follows an attempt by the media and the general public to asses blame. But the thing we must realize is that assessing blame does not necessarily mean that a future crisis will be averted. What is needed and what we get quite often are two different things.

The field of finance and financial instruments such as stocks and bonds fill an important need in our dynamic economy, but without suitable regulation and the proper oversight, the service the field provides becomes a nightmare. I know that analogies have their limitations, but let me make a few basic ones here at the beginning. Wall Street, the business of underwriting and selling investment securities is an urban jungle. Survival and making lots of money is everything.

The field attracts a wide assortment of bright and talented people from many different backgrounds, but the one thing that those that make it, or those that do well, is the strong desire to make lots of money. Money is the yardstick by which everything is measured. If you think I am wrong, that is all right with me, but then do not go looking through the 400 wealthiest people in America when that Forbes issue hits the newsstand. Money and the speed of making money is what moves Wall Street. This is the way it is, just accept it. On the other hand, government regulation is necessary to keep the feeding frenzy from getting out of hand. When regulation does not do its job, the feeding frenzy gets out of hand and we have a crisis.

Those involved in the business of providing the service of raising capital and then placing investment securities with investors, needs to be regulated and monitored in today’s economy more than ever before. The amounts of money, the speed with which the money changes hands and the giant pension funds that are invested in these securities makes better regulation more than just essential. Without proper oversight there is nothing standing between the predators and the prey. Many people, far more experienced and educated than me, could construct a financial system that would keep an abuse from becoming a crisis. But, what is at stake is more than just politics and egos, it is money, lots of money. Even the Great White Shark will rattle your protective cage when it is being kept from its prey, and Wall Street is no different.

It is my opinion that little will be done to correct the deficiencies in the financial system of investment securities and markets. There is just too much money at stake, and lifestyles and lives are on the line. Those with money will use it to bring about their desired results. There is no such thing as an endangered species on Wall Street. Fresh marks are born everyday.

I worked my whole career in Ohio in three cities, Cincinnati, Dayton and Columbus, and yet I have enough first hand stories of greed to fill a book. Those that shoot fish in a barrel do not want to work any harder than they have to. Even with regulations where they are, the competition is fierce. The marks do not have the political muscle to change the rules, and as a result, they will remain vulnerable now and in the future.

Some day, the marks may become educated enough to push back with enough force to cause positive changes in regulation and oversight to be made, but I do not look for that to happen anytime soon.

Stay tuned.