Thanks for the reply. The comment above makes me think that a major priority–given the inevitable attempts to NOT follow regulations–is to make sure that the “innocent” are not affected when things go wrong as a result of gaming or avoidance. Either a buffer or, as in the Glass Steagal Act, a way decrease overall inter-connectedness.

Again, thanks for your work here.

Richard:
The single most important change was The Gramm-Leach-Bliley Act of 1999 (http://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act) which effectively gutted the Glass Steagal act of 1933. “Glass Steagal had prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company.” Breaking down the walls of separation enabled these “too big to fail” financial behemoths to develop, and let them pool government insured deposits with highly risky investments and insurance bets; in the name of “free-market capitalism.” The real stupidity of the Gramm act (Phil Gramm has a PhD in economics, and later went on to chair UBS and its tax evasion games… which should have aroused suspiscion) is that the Great Depression had been triggered by such mixing of interests. Glass Steagal had been working for over 60 years.

However, the development of unregulated derivatives and of unregulated hedge funds also contributed to the collapse of 2008. In these cases it was as if new type of vehicles had been built for highways for which there were no driving regulations and therefore they were free to drive any way they wanted to.

A similar gaming happened relative to emission controls on automobiles. Light trucks were exempted, in part because there were relatively few at the time, so they were promoted by the auto industry whose profits on them were higher because they had no emission controls… until they became a substantial part of the automotive market.

Which brings out another point: some clever people will always try to game, get around, a set of regulations. Regulations must be updated in response to such gaming to remain effective. We seem to have the idea that we can put rules in place and leave them there unreviewed and unrefined. We need to imitate natural processes like the body’s immune system which has a basic system in place (Glass Steagal), simple and usually effective, and then an adaptive layer or two on top of that… a part that learns to identify and destroy specific pathogens based on recent experiences… Some members of the financial community behave like pathogens and parasites searching for ways to bypass the existing immune system and suck the nutrients out of the rich pools of money for personal benefit. We react to bank robbers because they are crude..like chiggers biting. Executives have learned how to bleed their companies like leeches, or ticks…. painlessly at the time, harm evident only when they’re through. Many of them are even unaware of the process that brought them such riches for so little effort and so little blowback from their victims. I wrote about the 30 year process in an early post: “Executive Compensation and Other Parasitic Loads” Phil Gramm, while a Senator, merely took the gaming to a higher level, meta-gaming, which destroyed part of the basic immune system of the financial community, thereby freeing these huge pools of resources for the parasitic bloodletting that has followed. Then he went to UBS to do a little personal sucking, sort of a thankyou from his fellow parasites.

However, to some extent we are all tempted to do this in our jobs…. get at much out as we can for as little effort as possible. All corporations need immune systems for this… and none exist at the executive levels.

Ed Lee

Which translated means:
1- You the People cannot do anything, since this is supposed to be the “Government of the People by the People for the People”
2- Pay about 40% of your income in Taxes and get almost nothing for your Taxes
3- Only the Rich & Big corporations “can do things… and are the solution….” IF we can brain wash you people to believe that the Government of the People cannot do anything… and thus the Con Job is complete.

You can read much more about this in an article I have written here:
http://anoox.com/blog/Real_News.34034

Dean:
Thanks for your comments. I particularly agree with you about the fallacy “government is the problem”. That is one of the dumbest and most destructive remarks ever made. However, it did help Ronnie get elected because it made a good sound bite and felt good to people who know virtually nothing about government or economics.

However, a fundamental issue is that to sustain the flow volumes we need highly regulated structures and thoroughly educated users. At this point in our history, we do a decent job in driver education, but a piss-poor one educating anyone about capitalism and markets… and the tightly regulated balance needed between the support of individuals and of institutions. Government is the only institution we have for developing, monitoring and enforcing this balance. If we destroy a healthy government (again through collective ignorance more than malice) the structures will collapse and we will return to the default condition of all economies….. the pre-Industrial state of local systems dominated by tyrants who control economic, political and religious power and who pass it on by inheritance. That condition will only sustain fewer than 1 billion people world wide, with all but a few of them in grinding proverty.

Will check out your link.

Thanks again for your comments.

Ed Lee