Summary
Something has been missing in recent years -- the firm hand of financial regulation. Some will say that asking for tougher regulation will invite overregulation, but it is appalling that the market excesses of the past decade have been allowed to send the global economy into a tailspin to the detriment of so many people. This is not an issue for community banks, which generally stay close to home and only make loans that they're willing to hold on their balance sheets. The institutions that need to be reined in are the capital markets players that would use large amounts of debt to accumulate huge shares in highly complex securities and derivatives products that receive little regulatory scrutiny. Leverage, financial complexity, and inadequate regulation are a deadly combination, and the world is living now with its consequences
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Ghosts of Lessons Past
When the subprime mortgage market collapsed in the fall of 2007, Citigroup was sitting on a $43 billion portfolio of mortgage-related assets that had been accumulated by an aggressive team of traders, according to an article last November in The...
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