Comment Text:
Good Day,
One of the primary reasons for the financial meltdown appears to be inadequate regulation of financial institutions. The fact the banks could trade in exotic financial instruments of their own making exhibits a runaway, headstrong and irresponsible business development. For Americans of every walk of life to maintain their freedom, we need healthy banks, not banks freed to trade bank funds in highly speculative ventures. The possibilities of these gigantic financial institutions (including insurance companies) undertaking further potentially destructive actions by allowing trading with the banks funds is highly probable.
Now that these institutions have been tagged as "too big to fail", they most certainly are at the very least sub-consciously operating outside of the dictates of market economics -- meaning that executives will now take more extraordinary risks in the belief that the US government will bail them out. So the medicine is this: Either pass strict regulations prohibiting banks trading their own funds or not. Failure to do so will inevitably lead to another financial crisis, and the backlash will be considerable -- the likelihood of public demand for maximum asset value for any financial institution (after which the institution must spin off part of itself as a completely separate entity without financial ties to the original parent), thus allowing a bank to fail if its executives do not exercise sound judgement.
Lee Stein
Stein Writes, Inc.
