Comments on: Regulation could make bank FAT tax unnecessary Mon, 26 Sep 2016 03:26:00 +0000 hourly 1 By: RichardC Fri, 23 Apr 2010 06:40:18 +0000 “The global banking industry resembles an obese teenager. All the relatives agree that drastic weight loss is necessary, but each has a different diet plan…..But regulation, not taxation, is the better way to cut these banking behemoths down to size.”

To the author: as cited above, you began and ended your article with conjecture, although I enjoyed reading everything in between. Why not just stick with the facts and a logical analysis instead of wildly throwing in unsupported statements? I’d like to hear from a sincere capitalist why “size” really matters on Wall Street. That appears to be much more of a scapegoat quality shared by the primary “villains” than anything based on economics or business strategy. Most firms will reach a maturity phase where at some point the only choice they have is to split up or divest in order to continue to generate the returns their shareholders demand. If a firm can continue meet return expectations with a $500B market cap, why would any pro-capitalist government prevent them from doing so? If the idea of “size” isn’t based on total revenue but instead market share, be reminded that some of the biggest problems came from smaller institutions. Nearly 150 smaller banks have been shutdown by the FDIC, along with numerous boutique investment firms who all failed for the same basic reasons as the big guys – leverage, risk, and poor management. In general, healthy institutions survived, unhealthy ones died, and size was not a common denominator.

I do agree that more regulation is needed, but not primarily on the processes involved. The regulation needs to be more on the people involved with these highly complex and fragile instruments. Too many people were getting involved without thoroughly understanding all the factors involved, and instead of admitting that, they allowed themselves to be outmatched by smarter players who were only counting the money they’d make off the deal. Lawyers need a J.D. and to pass the bar exam before most firms would hire them to handle a complex legal case, and doctors need an M.D. and to pass their boards before a hospital would ever let them operate on a human being. Why is it that a spoiled kid with nothing but an undergraduate Ivy League degree (business major optional) and a BlackBerry full of contacts can show up on Wall Street and be trading billions of dollars of other people’s money almost immediately? I would say that’s the much bigger problem….