Proprietary Trading and Financial Reform

Posted in Blog at 2:36 pm

Is it really necessary for banks to assume so much risk on behalf of their clients that the hedging of said risk would constitute such a large portion of their activity as to permit them to hide proprietary trading within it? In my experience, a great deal of what banks do for clients is (a) immediately sterilized, or (b) laid off upon other clients, or (c) grossly exaggerated. Banks don't "risk" much on behalf of clients, although they may speculate in parallel with them, or even against them. Read more [...]


Is Proprietary Trading Essential to Banking Customers?

Posted in Blog at 2:43 pm

When the big Wall Street firms, already riven with conflicts, began to merge with other financial organizations, and later with commercial banks, they always made sales pitches to us as investing institutions, telling us how their increased capital base could be put to work in our behalf as brokerage clients. They made the same pitch to their corporate clients. Twenty-five years on, clients are still waiting to find out how this increased capital will help them. Read more [...]


The Example of the European Banks

Posted in Blog at 2:52 pm

The trading mentality is inimical to the prudence necessary to run a commercial bank, and the very necessary function of significant risk-taking should be taken on by separate organizations that are not also insured and protected by governments because they accept demand deposits, clear everyday financial transactions, and serve as the gatekeepers to most everyday economic activity. Read more [...]


A Modest Proposal

Posted in Blog at 2:56 pm

One important aspect would, I believe, be key to changing the way institutional investors deal with the managements of companies they own: a legally enforceable duty of responsible stewardship on the part of major shareowners toward the companies they have invested in. Read more [...]


Reply to Robert Pozen, “A Mistake that will make banks riskier”

Posted in Blog at 11:27 pm

(The following was written in response to an opinion piece in the Financial Times on January 12th 2010, attacking the notion that a restoration of Glass-Steagall would improve the financial system.  Mr. Pozen’s remarks were also supported in a reader-submitted comment by Bevis Longstreth, who argued as well that the original Glass-Steagall Act was a mistake, because it did not address the causes of the many bank failures of the Great Depression. I did not deal with this directly, although I think Read more [...]


Congress’ Priorities versus the Financial System’s Needs: an exchange

Posted in Blog at 3:27 pm

Winning conservatives over to the cause of reform is where would-be reformers should concentrate their efforts. . . A totally unregulated capital market is almost a misnomer: it would be a black hole waiting to devour all its participants as soon as prices began to fall. I believe that a change in structure would be better than trying to regulate every single possible risk a market participant might ever take, and then discovering that there were new ones you hadn't known about. Read more [...]