Investment bank regulation

[Bertram]

As an American liberal, I don't know very many arguments for why we shouldn't regulate investment banks. Specifically like limiting derivatives trading, preventing credit default swaps, but also or either in a general sense, or to do with other investment banking issues.


I can't find any that are non-pundit based arguments that would hold up in a debate against ivy league debaters.
Might any of you know of any good arguments for why we should not have more regulation have deregulation specifically in the investment banking sector?
Or to even point me in the right direction towards some conservative blog, a good columnist, that sort of thing.
Your help is much appreciated.

[Erasmus]

As an American liberal, I don't know very many arguments for why we shouldn't regulate investment banks. Specifically like limiting derivatives trading, preventing credit default swaps, but also or either in a general sense, or to do with other investment banking issues.

I don't care what investment banks do, so long as we don't bail them out when they fall on their butts.  Not all derivative trading is evil, you know.  Not all credit default swaps were evil, either.

I can't find any that are non-pundit based arguments that would hold up in a debate against ivy league debaters.
Might any of you know of any good arguments for why we should not have more regulation have deregulation specifically in the investment banking sector?
Or to even point me in the right direction towards some conservative blog, a good columnist, that sort of thing.
Your help is much appreciated.

Regulation leads to higher costs of business.  This means BofA might do something like institute a $5 per month charge on account holders with low balances.  That's one issue.  We have SEC rules in place that make it a crime to commit fraud, secondly.  To the extent that some of the mortgage pools were fraudulently advertised to investors and rating agencies, people should be in jail.  Start putting those guys in jail, and they'll stop.  You don't need new regulations to do this. 

The credit default swap game was risky, and they all knew it.  Some people made billions, some like AIG lost their asses.  When you take a small amount of risk and multiply it a few thousand times, the numbers get rather large.  Why put taxpayers on the hook for those losses?  AIG investors should have lost, Citi investors should have lost, etc.  But no bailouts.

Lastly, investment banks are smarter than politicians 99% of the time.  So far more often than not, the legislation is ill-drafted to regulate, has consequences that punish lots of firms that aren't doing things out of line, and doesn't fully stop or foresee the next ingenius derivation of products that get around the legislation.  So why keep doing it?

Frank Dodd, for example, is poised to literally cripple the capital markets because of its idiotic requirement that issuers take down 5% of new bonds they issue.  Ridiculous.  The capital market is easily 100 times larger than the stock market.  This will effect credit cards, mortgages, auto loans, etc.  The issuers that can still issue after this legislation is passed, because of the added 5% burden up front, will simply raise the rates on the loans they charge consumers.  You haven't accomplished anything.

[docstew]

I don't care what investment banks do, so long as we don't bail them out when they fall on their butts.  Not all derivative trading is evil, you know.  Not all credit default swaps were evil, either.

Regulation leads to higher costs of business.  This means BofA might do something like institute a $5 per month charge on account holders with low balances.  That's one issue.  We have SEC rules in place that make it a crime to commit fraud, secondly.  To the extent that some of the mortgage pools were fraudulently advertised to investors and rating agencies, people should be in jail.  Start putting those guys in jail, and they'll stop.  You don't need new regulations to do this. 

The credit default swap game was risky, and they all knew it.  Some people made billions, some like AIG lost their asses.  When you take a small amount of risk and multiply it a few thousand times, the numbers get rather large.  Why put taxpayers on the hook for those losses?  AIG investors should have lost, Citi investors should have lost, etc.  But no bailouts.

Lastly, investment banks are smarter than politicians 99% of the time.  So far more often than not, the legislation is ill-drafted to regulate, has consequences that punish lots of firms that aren't doing things out of line, and doesn't fully stop or foresee the next ingenius derivation of products that get around the legislation.  So why keep doing it?

Frank Dodd, for example, is poised to literally cripple the capital markets because of its idiotic requirement that issuers take down 5% of new bonds they issue.  Ridiculous.  The capital market is easily 100 times larger than the stock market.  This will effect credit cards, mortgages, auto loans, etc.  The issuers that can still issue after this legislation is passed, because of the added 5% burden up front, will simply raise the rates on the loans they charge consumers.  You haven't accomplished anything.

+1

[Rugnuts]

I don't care what investment banks do, so long as we don't bail them out when they fall on their butts.  Not all derivative trading is evil, you know.  Not all credit default swaps were evil, either.

Regulation leads to higher costs of business.  This means BofA might do something like institute a $5 per month charge on account holders with low balances.  That's one issue.  We have SEC rules in place that make it a crime to commit fraud, secondly.  To the extent that some of the mortgage pools were fraudulently advertised to investors and rating agencies, people should be in jail.  Start putting those guys in jail, and they'll stop.  You don't need new regulations to do this. 

The credit default swap game was risky, and they all knew it.  Some people made billions, some like AIG lost their asses.  When you take a small amount of risk and multiply it a few thousand times, the numbers get rather large.  Why put taxpayers on the hook for those losses?  AIG investors should have lost, Citi investors should have lost, etc.  But no bailouts.

Lastly, investment banks are smarter than politicians 99% of the time.  So far more often than not, the legislation is ill-drafted to regulate, has consequences that punish lots of firms that aren't doing things out of line, and doesn't fully stop or foresee the next ingenius derivation of products that get around the legislation.  So why keep doing it?

Frank Dodd, for example, is poised to literally cripple the capital markets because of its idiotic requirement that issuers take down 5% of new bonds they issue.  Ridiculous.  The capital market is easily 100 times larger than the stock market.  This will effect credit cards, mortgages, auto loans, etc.  The issuers that can still issue after this legislation is passed, because of the added 5% burden up front, will simply raise the rates on the loans they charge consumers.  You haven't accomplished anything.

people that "invest" need to know what they are investing in. this aint 1891. with the likes of instant media and the internet, the information is out there to investigate your investments. someone is gonna profit, someone is not. if you think the investment looks shady, dont put your money in it. if you see someone lose big and feel bad for them... dont cry for SOMEONE ELSE to bail them out.
fraud is one thing, it should be illegal. bailouts are another. the only regulation needed in the past 5 years was the prohibition of protecting losing investors. it would put an end to those investments pretty fast.

[LC EFA]

Investment is always a gamble. Generally the higher the risk the higher the reward and there's really no such thing as a 100% safe bet.

If you don't want to play the game - don't. If you're unable to bear the cost of loss, don't play the game.

Granted there could be some more in the way of warnings in PDS issued by some institutions that there's a potential for catastrophic losses, just so that people are fully aware of what they're getting involved in.

An over regulated investment industry would return near nothing to the customers. Reduce the risk - reduce the return.

[Erasmus]

people that "invest" need to know what they are investing in. this aint 1891. with the likes of instant media and the internet, the information is out there to investigate your investments. someone is gonna profit, someone is not. if you think the investment looks shady, dont put your money in it. if you see someone lose big and feel bad for them... dont cry for SOMEONE ELSE to bail them out.
fraud is one thing, it should be illegal. bailouts are another. the only regulation needed in the past 5 years was the prohibition of protecting losing investors. it would put an end to those investments pretty fast.

Yep.  And the financial institution stocks are very, very complicated.  It's different investing in BofA than it is say Wal-Mart or Exxon that may have one or two classes of stocks and fairly set and routine transactions.  We've had legislation and regulations on our books now for 80+ years designed to make sure investors have the information necessary to make decisions on their own.  They just need to be enforced.  We don't need new regulations or fancy Frank-Dodd garbage that will just shove lots of the players out of the business.

[Bertram]

Thanks, this was good and would have helped if Yale picked motions that are relevant.