Comment Text:
Dear SEC Members,
It is imperative that every member of the SEC recharge their memories, that the near missed global economic depression was primarily the result of unconscionable leveraging by our financial institutions that was approved by our representatives in congress and the SEC. Any bubble may result in an economic downturn. The difference at every level, be it government, corporation or individual, is that the excesses of leveraging and debt is what ultimately determines the severity of the downturn.
The idea of excessive gambling and leveraging by individuals who are not active participants in the underlying instruments in question, should be severely restricted from using derivatives for the purpose of betting for profit, if not outlawed. The entire argument used by these speculators, that they are needed to add liquidity to markets, assist with price discovery and innovate the finance business, is primarily skewed to support their personal "fast money" businesses. They sound like a bunch of parrots. It is imperative that every member of the SEC keep in mind, that the near missed global economic depression was primarily the result of unconscionable leveraging by our financial institutions that was approved by our representatives in congress and the SEC. The derivatives market is primarily designed to achieve one simple goal: to mitigate risk for parties who are actually involved with the underlying instruments. We only need to allow a very limited number of speculators to trade in these instruments (if any) to achieve price discovery and liquidity.
The consequences of the unbelievable risk that our financial institutions took in the creation of these instruments remains with us today, with may families and small businesses devastated by the preposterous risk taking. I believe that it is imperative that these instruments traded with transparency on a regulated exchange. But more importantly, speculative type transactions that due not serve as a hedge risk behind a contractual instrument, need to be severely restricted, if not totally outlawed. This includes hedging against original naked bets. Let these financial institutions gamble with option type transactions which do not harm the system for their risky investment appetites. As we have learned, there is not enough money in the world to cover any significant valuation losses in $600 trillion or even $60 trillion of mortgage backed securities swaps.
The ability to ascertain the risk and liability behind these instruments, as well as the actual valuation losses of mortgage backed securities, is what ultimately brought the world financial markets to its knees. So, I urge you, to take the necessary steps that will severely restrict leveraging requirements of exotic derivatives that places any financial institution in a position where it cannot reasonably cover their risk, and that you severely restrict participant involvement who are not hedging against an original financial obligation. We are not dealing with a stock value here. We are talking about risking the financial stability and livelihoods of the entire world. I personally have been devastated by the depth of this financial crises, which in reality is far greater than even the great depression, but masked by the brilliant and monumental efforts by the FED to add liquidity to financial system in almost unimaginable ways, to achieve economic stability. Society will be paying the true bailout tab and impact on Federal and State debt burdens for many years to come. The very standing of the US as world power and economic force is likely to have severe geopolitical consequences in the future. I do not believe that I am overstating the consequences for acquiescing to demands to approve excessive leveraging and risk taking by our major banks. The reality is, there is no more money to cover future bailouts, and actions are needed now to ensure the stability of our financial system. There is no tomorrow. Capitalism is at risk.
I feel confident that if each of your listens to your inner voice and conscience, that you will make the right decisions that reflect the integrity and values that our citizens expect from from our regulatory agencies.
Regards,
Pat Giammarco
P.S. (As a side note, restricting fast money temptation helps steer our major banks to invest in America again, as extension of the FED and Federal Government policies, by encouraging the desperately needed mortgage and small business lending for more of their profit s again, without which we cannot increase property valuations and business earnings, in order to reverse the severe risk that still exists in the securities market, banks balance sheets and States tax revue shortfall).
