When somebody like Martin Wolf is forced to become the radical, you know we’ve got problems.
His always must-read FT column today argues in its inimitable way that “cautious reform is the risky option.”
Wolf wants no part of it. Among the drastic measures he proposes are 25 percent capital reserves, meaning one dollar in reserve for every three dollars lent (Goldman Sachs is at 7.7 percent now, or about twelve-to-one leverage, while Morgan Stanley is at 5.7 percent or 16.5-to-one). He also pushes for tax-funded ratings agencies to eliminate the conflicts of interest inherent to that critical industry, as well as banning deposit-taking institutions from propietary trading, and most surprising, he endorses the ideas of Laurence Kotlikoff, which would turn banks into mutual funds that can’t gamble with deposits (read more on that here).
In other words, the current bill before the Congress, which even Lloyd Blankfein says he supports (though he’s surely doing his best behind closed doors to water it down), doesn’t go anywhere near far enough. Here’s Wolf’s parting warning:
The first is that to make anything close to the present system less unsafe requires radical changes in the rules. Tighter supervision is not enough. Incentives must change fundamentally. The second is that a financial system in which intermediaries assume risks on their own books is inherently unstable. It is too likely that they will make the same mistakes together, thereby creating a panic and threatening the system, with devastating economic consequences. This is the Achilles heel of market economies. We have been warned. For battered high-income countries, it will be the flood next time.
Now, if you’re looking for reasons why the SEC failed in the past they aren’t hard to come by. Start with political leaders who clearly didn’t believe in the mission; proceed to the agency’s grotesquely underfunded workplace where lawyers had to do their own filing, mail-sorting and photocopying; and arrive, finally, at the revolving door, which sometimes transformed SEC jobs into stations on the Wall Street career path and worked fairly predictable effects on enforcement.
This was an agency whose mandate, essentially, was to crawl out on an ice floe and die. Were we to look closely at its employees’ computing habits during the Bush years, I bet we’d also find that they bought stuff on eBay, wrote copious email, and read a lot of blogs.
In other words, like any other office.
Frank cleverly ties libertarian support for Freedom of Porn to libertarian support for sleeping regulators:
Indeed, the revelations about porn consumption at the SEC must be a libertarian’s own wet dream. Here you have a libertarian cause célèbre—the endless, uncontrollable oceans of Internet pornography—somehow drowning that libertarian bête noir, regulatory enforcement. Polymorphous perversity itself managed to muzzle Big Brother.
How awesome is that? Why, it’s as awesome as if Ayn Rand herself returned to earth and—shrieking, “bow to Goldman Sachs, parasites!”—led the bank industry’s lobbyists to victory over the financial reform bill.
— Ryan Tate of Valleywag reports that Apple is at it again. It rejected a Gay New York 101 app for “objectionable content.” This was hardly hardcore porn. One picture Apple flagged as inappropriate was a male stripper with his G-string on. Another was a picture of a Renaissance nude. Seriously!
More concerning, though, is Apple’s restriction of political speech on its platform. Remember it initially rejected Pulitzer-winning editorial cartoonist Mark Fiore’s app for “content that ridicules public figures,” which is what political cartooning is all about. With Gay New York 101, it listed this caricature of Sarah Palin as one reason for the app’s rejection:
Press folks, this corporation is the same one that reserves the right to squelch what you can publish in apps on its computers. You’d better act while you still have some leverage.