One always finds a certain lassitude in Critics, who would call for greater regulation and reform of the banking system. It consists of a relative disrespect for the loss of other peoples’ money, where they think bank failures cannot rob people of their Cash as effectively as bad management. There is a basic untruth in that assessment. The primary goal of any financial reforms must be the protection of the aggregated capital of the Depositors. There is a failure in financial regulation when Depositors take a Nosedive along with bank management.
There are two basic elements wrong with most of the proposed regulation and policies. The first consists of the insistence of treating the financial system as distinct and separate from all other business sectors. Any effective financial regulation must contain Constraints across the economy, not simply target financial institutions; else banking systems will be absorbed and hidden by other business powers, all in the name of efficient business management. All business management is in a continual search for the most Profit-laden means of acquiring operating capital. Financial instruments will flee faster than legislators can capture control of Risk suppression. The second thing wrong with proposed legislation remains the substitution of Regulation for leadership and brains. Following complex Rules will never be as effective as intelligence and sound judgement, especially in the arena of Speed; no bureaucracy will ever keep up with a Traders environment.
My approach to the entire Problem would be universal in scope, and effective in action. I would start by first limiting the Windfall capacity of Bonuses and Profits sharing; and doing this across the board for all business. I would pass legislation detailing there would be a 5-year delay in the reward of all such items, under the control of neither the business awarding the sum, or the control of the beneficiary of the award. The funds must be placed within a blind trust operated by a federal Trade Commission, and beneficiaries would have to appeal for the release of said funds after the 5-year period; businesses being able to appeal for repayment of such funds to themselves anytime they find error in the initial award due to malfeasance or poor policy on the part of the beneficiaries. The Approach would realign Salaries, returning them the role of life subsistence; while bonuses and such would retain their value as retirement capitalization. It would serve two purposes: again making Wages the primary vehicle of Income; and allowing review time to assess the soundness of previous awards–proving their actual value before release of funds. It is also clear such a system is critical and necessary throughout the economic structure, not just the financial sector. lgl