I think that Dodd-Frank aims at protecting consumers and making markets more transparent by shifting retail business away from OTC to regulated markets. This is not necessarily a bad thing. The only problem with Dodd-Frank is that it is technically flawed.
A) I never said they shouldn't prosecute those who are fraudulent. Don't put words in my mouth.
B) If someone wants to go swimming with sharks, it's not the government's business to tell them otherwise.
I agree that there should be restrictions and limitations on pension funds, IRA's, 401k's, etc....but for an individual investor, it's overstepping the bounds to say what an individual investor can or can not invest in.
Under your form of thinking, we should just outlaw anything the government deems as risky or irresponsible....which is exactly why I called it socialism.
If kids get fat, we'll just tell them what they can't eat.
If people use tanning beds, instead of letting them die from skin cancer (on their own dime) we'll tax the hell out of them and make it prohibitive. (same with alcohol or smoking).
If someone isn't smart enough to realize that OTC/BB instruments and products are frought with risk and fraud, then maybe they have more money than sense (and as such, I don't feel badly when they get hosed).
The way to rid the world of fraud isn't to limit the rights and freedoms of good standing citizens, it's to punish the criminal element and to allow free markets to work and idiots/irresponsible/ignorant to fail.
A) The free markets will auto correct. With Enron, Madoff, and all other forms of ponzi schemes and frauds, the way to correction is through information availability and awareness. Individuals will therefore be more wary (of their OWN ACCORD) and more selective when placing their investment/retirement/nest egg in the hands of someone else.
Again, I think there should be limitations on public funds, pension funds, etc, etc. But for an individual investor, I like having the responsibility (aka Liberty) to make my own choices and not have the government make them for me.
Your last response leads us to believe that you would support the government outlawing all hedge funds and investment firms.
B) The other way you prevent crime (which is LOST in this country) is to really and severely punish criminals. We don't punish criminals enough. You know why people don't spray paint cars or throw chewing gum on the ground in Indonesia? Because they'll cain your *$$ that's why. In Australia, they don't mess around with Drunken Driving. If we totally hammer *$#%ed people here for crime, and the ACLU didn't make prison a vacation resort, people would be less apt to commit crime.
If it were up to me, Madoff would have been executed....(actually no, it's cheaper to keep him in jail for life because the ACLU and sniveling liberals want to give the guy 45 appeals if he's on death row).
I'm a libertarian when it comes to most thing and free markets and liberty to prosper (and fail) aren't negotiable.
Just because the government wants to protect a group of irresponsible idiots, don't punish the rest of us by restricting our choices/liberties.
MOST investment frauds are discovered by someone with half a brain who does their homework. The largest scheme in FL History (RRA) was discovered by a potential investor who simply asked for Rosenfeld to back up his claims with reasonable evidence. When he could not, the guy called the authorities.
In the end, if you're asking someone else to control your money, then you're taking a risk that you should bear. It's not the responsibility of the government to certify or approve the people you trust. The government SHOULD and does create "safe" and regulated environments, but it should not keep the idiots from venturing outside those boundaries (if they so choose).
There is a widespread confusion and incomprehension in the US leading to false glorification of freedom. It is an illusion that free markets auto-correct. All mechanisms for auto-correction only work under limited conditions. These conditions can only be maintained, if a market place is regulated.
You do not need Marx to understand that free market mechanisms will induce monopolies, you can also play Monopoly with your children and find out easily. Markets would not work without
- legal rules allowing to conclude an enforce written contracts (see economic problems in Russia, they have rules that are not enforced)
- transparency, which makes price discovery and competition possible
- institutions that take care of asymmetric information and power
THE MARKET FAILURE PROBLEM
Markets always fail. The problem is old. A nash equilibrium does not necessary lead to Pareto optimality. The Tragedy of the Commons is a 19th century term for an old problem, which is recurring ever since. Moral hazard is a modern version of market failure.
Markets always fail, therefore a mechamism needs to be designed to make them work. This has nothing to do with Socialsm. If you want to understand what Socialism means, please read F.A Hayek's book "The Road to Serfdom". It shows well that the principal problem of Socialism is a concentration of power. Market regulation does not mean concentration of power, but means the introduction of arbiters and mediators, allowing to solve the problem of Pareto suboptimality.
For a first brief understanding of market mechanism design, please read the attached.
The following 2 users say Thank You to Fat Tails for this post:
You know, if a guy was devoid of any history, he might buy all that. But the facts speak largely for themselves. According to your diatribe, European socialist states and communist states should be dominating the HELL out of the world economy.
The one viable exception obviously is China and that's for a few reasons. 1) They have a ginormous underclass population and enjoy the largest conglomeration of underpaid, cheap and low qualify of living labor in the world. (i.e. China has a nation of quasi-slaves). 2) The Chinese government turns an absolute blind eye to piracy and theivery of intellectual capital. They literally steal and reverse engineer virtually everything they produce that isn't under the wing of some foreign entity. 3) They manipulate their currency to favor exports (and simultaneously $*#& their lower class and take advantage of the cheap labor).
China's day is coming. Trust me...they can't keep the internet hidden and the man behind the curtain will be exposed eventually.
Secondly, free markets without all this regulation worked just fine for dozens of decades. All these social progressives act like we just stumbled out of the stone ages last year and if we don't adopt/support all these "regulations" to make everything better, then we'll all just die. I wonder sometimes how my parents and grandparents ever thrived or even surived as socialist progressives would have you believe that it was sheer luck.
The plain fact is free markets work better than heavily regulated markets. Obviously we agree on anti-trust and anti-monopolistic regulations.
But telling someone they cannot trade OTC/BB because it's full of fraudulent sharks and manipulators is a short sighted solution.
As I always tell the idiot liberals who romantisize about the merits of communism....give 'em a choice and see what happens. People ain't moving to Cuba in droves.
So if you give people a choice (i.e. provide a regulated market and let them choose their poison) then you can sleep well at night knowing if he chooses to trade OTC/BB and gets skinned by some pump/dump, then it was HIS choice.
The problem with all you socialists is that you're too soft to let anyone fail for being dumb or incompetent.
We should have let the banks fail. We should have brought the whole global economy crashing down...only then would we have learned the true lesson. As it were, we'll regulate for a bit, and then when everyone has forgotten, we'll go right back to the old routine....gambling and robbing.
In summary...."A man who carries a cat by the tail learns something that can be learned in no other way." -Mark Twain.
You can remove the idiots and the gullible from OTC/BB markets....but they're still stupid and they'll still find a way to donate their hard earned money to someone else.