Friday, February 6, 2009
A HISTORY LESSON
âGeneral affairs here are about as bad as they can be.â
-J.P. âJackâ Morgan, Jr.
August 8, 1907
â[R]egulatory bodies, like the people who comprise them, have a marked life cycle. In youth they are vigorous, aggressive, evangelistic, and even intolerant. Later they mellow, and in old age-after a matter or ten or fifteen years-they become, with some exceptions, either an arm of the industry they are regulating or senile.â
-John Kenneth Galbraith
The Great Crash 1929 (1954)
Most congressional hearings are tedious and boring. Television stations brave enough to broadcast these hearings are often meagerly rewarded with an audience of insomniacs. Sometimes, a hearing becomes controversial when the witness is unable to answer the senators questions. Sometimes, witnesses are caught in lies. This all happened Wednesday. The Wall Street Journal headline for February 5 reads âAt Madoff Hearing, Lawmakers Lay Into SEC.â
On February 4, 2008, we saw fireworks as the House Committee on Financial Services grilled the SEC over its recent regulatory failures. This was not the first time in the last year or two that such a grilling occurred. Prior hearings were not limited to giant ponzi schemes - some dealt with a little understood scheme â predatory short selling. The SEC is being asked today why the stock market has collapsed and how the lack of federal regulation enabled financial firms and money mangers to secretly operate in very risky and perhaps unethical ways. Often a look at history is useful in understanding modern behaviour.
I recently read two delightful books about our capital markets. The first was published in 2007 called The Panic of 1907 by Robert F. Bruener and Sean D. Carr, and the second is the book by John Kenneth Galbraith, the well-known American Canadian economist called Stock Market Crash of 1929 published in 1954. As I review the events leading up to the Financial Crisis of 1907 and the Stock Market Crash of 1929, I am fascinated to see certain patterns emerge. It seems that opaque âstock poolsâ were involved in both market events as well as complex schemes to game the markets, using misinformation, and individual conduct that was illegal and perhaps unethical. Specifically both market events involved unbridled, abusive short selling by opaque entities.
Read the rest here:
http://www.sectales.com/
A HISTORY LESSON
âGeneral affairs here are about as bad as they can be.â
-J.P. âJackâ Morgan, Jr.
August 8, 1907
â[R]egulatory bodies, like the people who comprise them, have a marked life cycle. In youth they are vigorous, aggressive, evangelistic, and even intolerant. Later they mellow, and in old age-after a matter or ten or fifteen years-they become, with some exceptions, either an arm of the industry they are regulating or senile.â
-John Kenneth Galbraith
The Great Crash 1929 (1954)
Most congressional hearings are tedious and boring. Television stations brave enough to broadcast these hearings are often meagerly rewarded with an audience of insomniacs. Sometimes, a hearing becomes controversial when the witness is unable to answer the senators questions. Sometimes, witnesses are caught in lies. This all happened Wednesday. The Wall Street Journal headline for February 5 reads âAt Madoff Hearing, Lawmakers Lay Into SEC.â
On February 4, 2008, we saw fireworks as the House Committee on Financial Services grilled the SEC over its recent regulatory failures. This was not the first time in the last year or two that such a grilling occurred. Prior hearings were not limited to giant ponzi schemes - some dealt with a little understood scheme â predatory short selling. The SEC is being asked today why the stock market has collapsed and how the lack of federal regulation enabled financial firms and money mangers to secretly operate in very risky and perhaps unethical ways. Often a look at history is useful in understanding modern behaviour.
I recently read two delightful books about our capital markets. The first was published in 2007 called The Panic of 1907 by Robert F. Bruener and Sean D. Carr, and the second is the book by John Kenneth Galbraith, the well-known American Canadian economist called Stock Market Crash of 1929 published in 1954. As I review the events leading up to the Financial Crisis of 1907 and the Stock Market Crash of 1929, I am fascinated to see certain patterns emerge. It seems that opaque âstock poolsâ were involved in both market events as well as complex schemes to game the markets, using misinformation, and individual conduct that was illegal and perhaps unethical. Specifically both market events involved unbridled, abusive short selling by opaque entities.
Read the rest here:
http://www.sectales.com/