What if the average American could not invest in the stock market or buy mutual funds? What if only the wealthy could do this? Well, as more and more regulations are put on the financial investment industry and more and more minority shareholder lawsuits abound, we may see a time when the little guy gets shut out.
In fact many financial planners will not take to anyone who has less than 500,000 dollars to invest. Why? Well they feel it is not worth their time and with all the regulations in the financial planner industry, well, it I really isn’t and it is not worth the risk that they might lose their license as the SEC is quick to launch an investigation over any little complaint whether legitimate or not?
What can the little guy do? Well you can go down to Merrill Lynch and open up a brokerage account where some young stockbroker will read the latest stock picks on a 3 X 5 index card and tell you where your money should go, while they churn the ever-living-crap out of your account?
Why is this happening? Well, the SEC has it in for the little guy, as every 6-8 days they make another rule, causing more paper work and costs to little financial planners and Broker/Dealers forcing them to adjust their business model or quit business.
This means they cannot make money taking on small accounts under 500,000 and therefore, the little guys gets to go to the wire houses to get bent over; so my question to you is how do you like your SEC now? Think on it.
Lance Winslow
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I am a conservative who supported deregulation of the banking industry. Now I think deregulation was a huge mistake and the Glass-Steagall Act should be restored and hedge funds should be more regulated. Glass-Steagall prevented banks from owning securities firms and expanding to multiple states. While I once thought this law was anti-business and outdated, I now realize regulation is necessary to keep the banking industry safe by keeping banks from growing too big. Glass-Steagall is a proven law that protected the American financial industry well for 70 years and needs to be brought back immediately.
The financial crisis of 2008 and the current economic problems are partly due to the repeal of Glass-Steagall and the failure to regulate hedge funds. I am certain the world economy cannot risk another meltdown now. There is simply not enough money to bail out governments and banks of the world again.
The Dodd-Frank Act was enacted as replacement for Glass-Stegall, but I believe this new law is weak and doesn’t go far enough to prevent banks from owning investment companies, controlling banks from growing too big, and regulating derivatives enough. Bank of America, a bank, now owns Merrill Lynch, a brokerage firm, for example. Merrill Lynch recently moved $75 trillion of derivatives to the FDIC insured Bank of America side. If these derivatives fail, Bank of America will be affected, and how will the US government bail them out? The derivatives market is $600 trillion, but the economy of the ENTIRE world is only $74 trillion. One doesn’t need to be a rocket scientist to see the dangers of having government insured banks owning investment firms that buy risky hedge funds.
http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html
http://articles.boston.com/2010-03-12/business/29329389_1_derivatives-gary-gensler-regulator
https://www.cia.gov/library/publications/the-world-factbook/geos/countrytemplate_xx.html
Billionaire Warren Buffet called derivatives “weapons of mass destruction” and Newt Gingrich thinks repealing Glass-Steagall was a big mistake.
http://www.reuters.com/article/2008/09/18/us-derivatives-credit-idUSN1837154020080918
http://news.yahoo.com/newts-15-seconds-sun-094500280.html
Normally I am an optimist who doesn’t go around saying the sky is falling like a paranoid Chicken Little, but from my reading from trusted mainstream sources I have become quite worried about the economy. If I had understood the risks of derivatives and debt in 2007 and had said something then, no one would have believed me. Now I hope people will listen when experts say the government needs to better regulate the financial industry.
Businesses and banks may say that regulation slows the economy, but I think that if the Glass-Steagall Act is not restored and hedge funds are not more closely regulated, there will soon be no economy at all. While I realize restoring Glass-Steagall and regulating derivatives is complex and difficult, I believe making a law is easier than repealing one.
I suggest reading “The Big Short” by Michael Lewis for a readable introduction to the financial crisis and why the banking industry needs to be regulated.
Restoring Glass-Steagall and regulating derivatives is a urgent problem and is not a issue that can wait to be fixed. I cannot stress this enough. Write to your elected officials, talk with your friends, and contact the media urging the government to make Glass-Steagall a law again and ask legislators to better regulate hedge funds.
“Too big to fail” is simply too big.