About Regulation

Davos has always been a time for introspection and calls for action, and recently investment luminary, philanthropist, and grumbly old fudder-dudder George Soros has called for increased regulation and oversight in the financial markets. D

See him speak here for the Financial Times. If the US government is going to help support these companies when they bottom out, sometimes to near-insolvency, shouldn't they be required to regulate them further?

George Soros claims that the past sixty years, and in particular the past 20 years has seen a huge boom in credit financing. A boom which this recession will end as he expects drastic changes to be made in the financial sector.

How much can the Fed help fix this issue? Once again, Soros reminds us that if the Fed continues to cut short term rates, once they get low enough, long term rates should jump over (due in part to the reluctance to hold dollars, and increases in inflation), crippling the Fed's influence to stimulate the economy.

Furthermore, Soros mentions that even the current Fed intervention will not have a lasting effect unless the actual system itself is cleaned up? Could this be done privately through a market correction? Chances are more likely that it would require some level of increased regulation, which is what the first article mentions Soros is promoting in the first place.

Interesting to note: Soverign Wealth Funds continue to offer 11th hour financing for these crippled financial institutions. SWFs are great for those they invest in, because they (at least appear to) be investing for the long term, which is great for the stability of a company's stock price. Unfortunately, because these are obviously other governments' assets, there may be more sinister influences in play. Some people are especially worried about this when looking at where Saudi money goes. In speaking about Arab investment in our nation's ports, as the Economist reports, "On January 15th Hillary Clinton said: 'We need to have a lot more control over what they [sovereign-wealth funds] do and how they do it.'” The Economist goes on to point out the hypocricy in our protectionist demands over who can invest in us, while at the same time demand more access to developing markets?

Not that anyone will be complaining about the financing now........

This ties in quite well with my last post about the Businessweek article which profiled SWFs in the middle east.

Also interesting to note: apparently Georgie only has one tie... (check all of the videos and pictures in the links)