Wednesday, November 5, 2008
Let The Work Begin
Now, let’s get to work.
Banking has a purpose. Finance has a purpose. Investment securities have a purpose. The underwriting of investment securities has a purpose. The purpose of all of the above is to facilitate the movement of capital to businesses that will build companies to provide a product, a service or both.
Incidental to all this, is the money that is made and lost in the pursuit of financing business enterprises. While there may always be “card sharks” in the securities business and “marks” to be taken advantage of, the purpose of finance is to arrange the flow of capital to business for the purpose of building products and services and in turn creating new jobs. As a result of all this, wealth is created.
Without regulation, oversight and transparency in the securities markets, we will witness again the destruction of wealth as we have seen over the last year.
With the new Obama-Biden administration, I hope their advisers will bring to their attention the importance that finance plays in rebuilding our domestic economy. Therefore, the need for adequate regulation, oversight and transparency is an essential ingredient to a stable economy. Naturally, one of the first things I think they should under take is the creation of a Federal responsibility for the rating of all fixed-income securities. Thus removing that responsibility from the private for profit companies that have failed the investment community and in turn the people of the United States. The time is now for a level playing field. The era of shopping a bond rating for an asset-backed bond should end now. While this recommendation may be only one small piece of the economic puzzle, it is, in my opinion, a very important one. Markets require a delicate balance, and confidence in the rating of debt securities will go a long way in rebuilding the confidence that was destroyed in the recent meltdown. The “weights and measures’ of the finance industry must be established if we are to repair our economy.