5/10/2010

The ruthlessness of being BIG

I wrote an article ‘The regulators say Yes’ to expose how dangerous the big funds are when they acted for their selfish good and with impunity. They are untouchable as the regulators believe that they needed the big funds to turn the wheels of fortune, to move the stock markets and lubricate the financial industry with their ingenious products and huge liquidity. The regulators became willing accomplices, appeasing the big funds in all their demands. Goh Eng Yeow wrote an article in the ST about learning from the Asian financial crisis when the speculators raided the markets for a big killing and almost bankrupt several countries. He is advocating that more regulations and safeguards be introduced to limit the irresponsible acts of the speculators. Actually he meant the big funds. Small speculators cannot do much harm on their own. They could only if they gang up and work in unison. Fortunately this is rare. On the other hand, the big funds, a handful of them working together can destroy a whole market of even bankrupt countries. And their untouchable status, like diplomatic immunity, only encourages them to turn wild. The ruthlessness of big financial institutions has manifested itself in all the major and minor financial centres, and Obama in particular is trying to do something to curb their extravagant and irresponsible ways. They need to be cut into smaller bits to be effective. They must be laws and regulations to limit how big they can become before they become too big to fail, and too big and dangerous. Then of course the regulators need to look in the mirror and ask how much of the crimes were part of their own doing, inviting the wolves into the dining room and dining with them. If the regulators continue to sleep with the devils, and probably benefitting from the association, this rewarding relationship will compromise their objectivity and moral responsibility to doing what is necessary for the good of the system and the investors at large.

9 comments:

Wally Buffet said...

Your piece on the regulators was very good. One of your best posts for 2010 so far.

But I'm just being the devil's advocate. Who will regulate the regulators? There's no end to this conundrum. I think it all boils down to the fact that since time immemorial, the big fish always eat the small fish and you may regulate to any degree you wish but sooner or later, a crack here, a pothole there and we are back to square one. Greed drives many to do what they teach their offsprings not to do.

Do you think that the big investment bankers have learnt their lesson? No way! They are now brain storming in their financial labs, ways and means to meander through the new rules and regulations to empty the pockets of the gullible, the stupid and the moms and pops.

Hehe.

Chua Chin Leng aka redbean said...

Wally, I am waiting for the American public to take a class act and sue the regulators to bankruptcy, and put a few of them behind bars.

I want to make it clear that the faults and culprits are the regulators, not the SEC. The SEC is just an organisation. It is the people running the organisations that are involved in all the criminal activities of cheating the innocent investors.

They must be clear not to sue the SEC and the regulators must be get away by pushing their guilt to the SEC.

Anonymous said...

Hi Reddy,

How much of what you have written are applicable to the situation here? Then why, I ask, did our regulators allow the system to become so flawed?

Let me guess, to build a financial centre, a big, big one, at all cost, and throw caution to the wind, including the interest of the small investors.

Anonymous said...

Me am in full concurrence with Wally.

And got to ask Redbean a question which i do not require him to answer. WHY MUST the American Publuc sue ?

If the Authority, read GOVERNMENT, is not able to regulate(answering Wally now) the Regulators which it(Gov) formed as part of governing a nation. Then what the hell are governments for? The only reason why governments over the world are failing in their duties is simply because too many of the parliamentarians are involved in businesses themselves.

Why would people said that there are conflicts of interests between working for the nation and working for the nation with the (ulterior motive) intention to benefit oneself or have advantages to ones'(politicians) own private enterprises??

Members of any government should never be allowed to run their own businesses. If they want to be businessmen then they should not be elected into parliament, the voters have to ensure that this is adhered to. And if anyone hold a political office, the Law must ensure that he is not in any commercial activity.

Both the Government and the People must work together to ensure that there is conflict of interest in running a country.

Me admits that talk is easy for me, however me also thinks that an effective and fair government will not have much difficulties in fulfulling its' duty.

patriot

Anonymous said...

Dear All;

'Both the Government and the People must work together to ensure that there is NO conflict of interest in running a country'.

Kindly insert the Word NO as You read the Sentence.

My apology: patriot

Chua Chin Leng aka redbean said...

One funny observation. We have the best talents in govt and the ministries. Why do we need to borrow all the corrupt ideas and systems from the Americans which have proven to be the most crappy and waiting to explode in everyone's faces?

By right the Americans should be coming here to learn from us. And they can also learn a thing or two about conflict of interest. We don't have such problems here.

The trick is to have demigods and immortals in charge. But a point to note, the Americans just could not afford to pay them.

And no, the millions and billions which the American crooks are being paid in the private sector are through crooked means, by setting their own salaries and paying themselves. By conniving with their board of directors, whereby they pay the directors handsomely, and the directors approved to pay them whatever they asked.

Anonymous said...

For the Sake of just wishing to see a great man in my life time, me will bank my hope in a man named Barack Obama. A very idealistic man who walk the talk up to now. Must say though, he was not impressive during his visits to SIN and China. It is also fair to say that he is one up against many, gonna be very tough for him. However does wish he would produce something spectacular.

The Primary Duty of every ruler is to ensure JUSTICE and that is there is no killing or fleecing of people in the land he rules or out of it. Why else do we asked for Ionescu, the Romanian Diplomat, to answer for his crime or why should the Romanian Government query him?? For JUSTICE!

Yes, many will tell me that some regimes shot and killed their citizens by the tens, hundreds and even thousands. True; but we must also note that those/these regimes were/are corrupted and or ruled by corrupted and or despotic leaders. Hopefully, our land is devoid of such.

Some corrupt leaders deprived their people and the countries they ruled of US$Billions of dollars, as the monies were takened out of the lands. In the case of the Americans, shall we say the US is richer for all the financial felonies, they took/take the monies from foreigners and brought/bring them home.THERE IS A DIFFERENCE.

So, the Americans had it good for decades, living it up like the Jews after crossing the Red Sea. Well, there was the Ten Commandment. And now the US has Barack Obama who hopefully will come up with New Ten or Revised Commandment.

All The Best To HIM !

patriot

Matilah_Singapura said...

Governments and bankers have always been strange, but uneasy bedfellows.

They need each other to seize control of the people's lives, property and liberty. You cannot have a locu of Absolute Power without:

1. Those who make the laws

2. Those who control the money

getting to gether and forming alliances. Althought they don't trust each other, both the bankers and the governments know it is in their best interests to cooperate with each other. Think of 2 rival mafia families forming an alliance.

There may not be "honour amongst thieves" but there can most certainly be collusion.

The only way to proper regulation is to have an unregulated free market in regulation with many different competing firms charging subscribers (investors) for their "whistle-blowing" services.

Over time, those firms who do the best job will gain the best reputation and those who are lousy or corrupt will lose reputation -- or get sued.

The govt does a bad job whenever it claims or is given the responsibility to do a job -- because there is no "market test" -- i.e. you lose money, get sued or go out of business if you fuck up.

That is why govt schools suck, govt transport is low standard and high cost, govt healthcare will kill you, govt companies will bankrupt SME's, and govt protection like police and military end up costing billions and kill people unneccessarily.

Fuck the government.

Matilah_Singapura said...

P.S. I diaagree with Wally: I thought your piece on regulators was essentially the same as most of your other posts referring to the "evil" side of human nature.

Everytime you evoke the "selfishness and gree" argument for the motivation of humans, you make a weak argument.

People tend to (tendency doesn't mean actuality) act in a way that the "benefit" is greater than the (apparent) "cost". If this wasn't the case, there wouldn't be any economic life -- or inter-personal life for that matter.

Therefore if a system incetvises "cheap cost" or "costless" behaviour, the result is a tendency for those behvaiours to become common.

So if it "pays" for the regualtors to do a sloppy job or to get into cahoots with the Big Guns, then you will have non-effective regulation.

Thus the only system is to have regulators which must "pass" a market test -- those who do a good job get paid, those who don't get eliminated from the picture.