Ethics without regulation won’t cut it

By J Saft
January 30, 2009

– James Saft is a Reuters columnist. The opinions expressed are his own –

There has been a lot of talk in Davos about improving business ethics, and mercy knows there is certainly room for that. The past few years, like the end of most booms, have included plenty of fraud, self-dealing, and general all-purpose unethical behaviour.

James Saft Great Debate

I think it’s fantastic that business should seek to raise ethical standards. It’s good business, and not before time. I do understand that a lot of what happened was a social phenomenon, and that a change in mores can only help.

But frankly, a new emphasis on ethics is a sideshow, and among some who propose it, a diversionary tactic.

While I agree that mankind is perfectible, as an investor, a citizen and hopefully some day a retiree, I am not willing to bet my future or the future of my children on it.

I want some guarantees.

I want some better safeguards.

And that means no schemes of ethical codes and self-regulation, but schemes of tighter regulation, greater oversight and dire consequences for those who breach them.

The problem is not (just) that people were greedy or self-interested. Greed and self-interest seem to occur pretty regularly, in my experience. It is true that they got a bit more reinforcement in the past decade then usual, and so might have grown,  but I really do think we are on a hiding to nothing if we try to solve the problems in the financial markets and economics and avoid future bubbles by more emphasis on ethics. The problem was that the rules under which everyone operated did not do enough to limit and channel greed and self-interest.

I want to make clear too that I’m not singling out bankers here, there was a lot of unseemly behaviour among consumers, house buyers and retail investors too.

But I do think that the financial sector needs to be very careful about how they pitch a new emphasis on ethics. If the intention is to try to minimize regulation, it won’t work and will only exacerbate the backlash they are already facing.

But why do I think I have the right to demand safeguards and guarantees? Well, I, like you, am a taxpayer and a voter and we are ultimately the bag holders for the misadventures of the financial sector. That sector enjoys a government guarantee which has been growing and growing.

Regulation means less leverage, less socialization of risk and privitisation of reward. And yes, I do understand that more regulation and less leverage imply lower growth, but also lower volatility in growth, which we can all agree is expensive.

And among the rewards that the private sector can earn there needs to be a better balance between how those rewards are parcelled out between employees and shareholders.  I don’t so much want a much bigger role of the state in deciding who makes what, but I’d like to see better a balance of power between shareholders and employees.

Take for example the trader at a AAA-rated bank (remember them?) who used that rating to borrow cheaply and buy a structured product with a higher yield. He banked his bonus and was still in the money when the trade went bad. He was taking advantage of two groups of people. First the shareholders, who should have gotten more of the benefit of the franchise they fund and second the taxpayers, who ultimately were insuring the whole rodeo.

I don’t expect the trader to suddenly become a saint; I do expect the system to take that into account.

——————————————————————————–

Also at Davos is Maria Ramos, CEO of Transnet, who raised some important questions about the discussion of ethics and business values:

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45 comments

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I fully agree with you, the idea of corporate execs, CEO’s, managers, brokers, fund managers, portfolio managers and others should be bound and held to the highest ethical standard, because they are controlling other people’s money whether it be individually, a pension fund, IRA, shareholders, etc.. but as we can see ethics is only a word that a lot of these people have used very lightly, if at all, in the past and the repercussion from not taking ethics seriously has caused a very serious economic situation globally. If they say we will become ethical, how are we just supposed to believe that after all the carnage that has been done in the recent years? The only way to stop it and force them to be ethical, unfortunately is to hold them responsible with regulatory agencies that actually regulate instead of turn their shoulder.

Posted by Damian Palmares | Report as abusive

There are no ethics in business. That’s why such emphasis is placed on “ethics” for public consumption.

When money is on the table morality goes out the window.

What it is is what is is.

Posted by RFL | Report as abusive

I agree RFL…there are no ethics in business whatsoever when you actually think about it.

Posted by Damian Palmares | Report as abusive

Ethics alone would cut it just fine. Responsible and honest people are out there. Just perhaps not in our federal government or wall street but they’re out there. I must say that I strongly disagree with the statements that there are no ethics in business. Your morality may go out the window when money is on the table but mine does not. And I know quite a few others personally as well that are quite responsible and ethical business people. Sure I know some real hawks as well but once again… not ALL business is unethical.

Posted by jason | Report as abusive

Mine doesn’t either Jason, there are ethical businesses and businessmen out there, in fact probably more than non-ethical but when they are not receiving praise for being ethical, it’s hard for the public to realize that; when there is so much unethical behavior happening on unprecedented levels across the board, from government to lawyers to brokers to CEO’s and on and on…but the issue of ethics also really needs to be addressed, because it is what has brought this country to our knees, and the global economy on it’s way down, or the lack thereof. Holding someone to ethical behavior and having a clear ethical and moral vision will not be enough, our leaders need to practice what they preach and lead by example. It starts at the top and works its way down, if you run an unethical business, how can you expect your employees to be ethical.

Posted by d | Report as abusive

Swearing an oath or following a specific code of conduct pursuant to ethics doesn’t necessarily mean you will follow your code of conduct. I think enforcing ethical behavior will be the only solution, which we are starting to see, lets just hope it’s not too late. I also think that more CEO’s and corporations that are doing the right thing should be given more praise and looked to as a role model in our society, if only for the younger generations to learn and emulate.

Posted by Damian Palmares | Report as abusive

You’re right Jason, mine don’t go out the window when money is on the table either, however I think that the unprecedented levels of unethical behavior across the board from CEO’s to lawyers to politicians to bankers and on and on play a major role in regards to the value ethics has on society and the economy. In fact, there are probably more ethical corporations and CEO’s than there are unethical ones but there is valid reason to raise a point regarding ethics when the amount of unethical behavior is such a proportionate amount and is having such a drastic effect on the global economy, not just the U.S. It starts from the top and works its way down, if you are an unethical CEO how can you expect your employees to be ethical?

Posted by Damian Palmares | Report as abusive

Better to spend more on regulation and know where my money is then to have no regulations and THINK I know where my money is. Trust everyone but verify everything. Also making the argument we had regulations in place to catch some of this unethical behavior would be valid if we adequetly funded the agencies responsible for eneforecement.

Posted by peter | Report as abusive

“there is valid reason to raise a point regarding ethics when the amount of unethical behavior is such a proportionate amount and is having such a drastic effect on the global economy, not just the U.S. It starts from the top and works its way down, if you are an unethical CEO how can you expect your employees to be ethical?”

My point. Sure there are ethical people in business, myself included.
Just not enough ethical people… And I think we would all agree that the primary cause of the present situation is massive criminality.

Posted by RFL | Report as abusive

It is criminality on a massive global scale, and that’s what I meant Peter, not only underfunded and understaffed but they are not equipped either to deal with the levels of fraud, I think it will be addressed though.

“The Fed missed spotting the risk because many of its field examiners lacked the needed sophistication, training and measurement tools. While the bets being placed by regulated banks grew in size and complexity, Fed examiners were ill-equipped to adequately measure, monitor and report on these risks.”

“Fed examiners need to show a strong aptitude and understanding of the risk-taking activities which now drive bank earnings. The Fed should hire from the very institutions it regulates. In the last decade, the flow of hiring has been primarily from the Fed to such banks, which has further eroded the strength of the national examination force. In addition, adequate incentive systems need to be put in place to minimize the brain drain and insure that the best examiners have financial incentives to stay.”

Those quotes are from this article:
http://blogs.reuters.com/great-debate/20 09/01/30/is-the-fed-up-to-examining-your -trillion-dollar-bet/

Another good debate. Hopefully we will gain the knowledge and expertise to move in the right direction and gain the trust back of the people who are supporting these bailouts and stimulus plans.

Posted by Damian Palmares | Report as abusive

“I want to make clear too that I’m not singling out bankers here, there was a lot of unseemly behaviour among consumers, house buyers and retail investors too.”

This is of course true. At least in this respect trickle down has worked: The ethics – or lack thereof – and the pursuit of greed did trickle down indeed. However, the wealth did not.

Posted by Robynne | Report as abusive

We need some highly ethical and responsible watcher watchers (Is that us the voters?) ! Our constitution tells us that it is up to Congress to regulate commerce, coin our money, and declare war. Just think of all the ethics and responsibility one needs to have to hold true to those duties. The President swears an oath to preserve, protect and defend the constitution. And just look at what our presidents and congressmen/women choose to do with just those few examples. Good thread and good people here. Maybe some of you guys should run for office! It all starts with responsible people. Responsible people have a great shot at being responsible leaders.

Posted by jason | Report as abusive

The Repulican’s have been preaching non stop about eliminating government and allow the markets to operate without regulation. We were all duped in believing this is the very best way to run U.S. Business and really the global economy. We’ve gone from the Technology bubble, to the housing bubble, to the speculation on petroleum in hedge funds etc. How many more people are going to have to have their life savings wiped out before we realize these Wall Street executives (human garbage) will stop at nothing to get rich. If that means employing sophisticated schemes to deflate you’re IRA’s and 401K’s, and brokerage accounts – they’ll do it plain and simple. The Republicans could care less and from what I can tell, they welcome manipulation, greed, and fraud provided it’s carried out by the right people. Take a can of soda from a gas station and you’ll have the cops bashing you over the head and slapping on a pair of hand cuffs. But create a sophisticated ponzzi scheme and make the right connections in Washington and/or Wall Street, and it’s smooth sailing – nothing to worry about. Mean while, the U.S. consumer is running up credit card debt, spending all their savings on techno junk, and getting in over their head in mortgages they should never have had to begin with. What’s wrong with this picture? We should be trying to save our industries and put these Wall Street criminals behind bars – Oh! but wait, they haven’t broke any laws because a deal is a deal they say. Well the laws are influneced by who? The very same people who are getting the huge bonuses that are bankrupting the nation. The American public is stupid for tolerating this, but we voted George Bush in twice – how idiotic is that? No! the solution is simple – since our government won’t protect us against these finaincal preditors, we need to act ourselves. We need to organize citizen groups nation wide that specialize in finding these financial preditors and destroy their lives. Burn their houses down in the middle of the night! Set their cars on fire in front of their offices, and kill them in public! How else are we going to send a message to these crimminals and our corrupt government that we need to get back to order! No major shift has ever take place without violence – Bloodshed is that answer unfortuntely.

Posted by Steve Cabella | Report as abusive

I think it’s great to have regulation and law enforcement. And if you want to say ethics is not enough, that’s fine. We need oversight, rules about disclosure, prosecution of fraud, and perhaps judicious use of the death penalty. Billionaire crooks who don’t care about anything else might wake up if they were haunted by the thought of the smell of their own flesh burning in the electric chair. Zzzzzt.

But regulation and law enforcement aren’t enough either.

There is something missing ever since conservative business schools started teaching that ethics and morality were something invented by the communists.

And that is Shame. Shame.

It’s nice if a CEO is proud when his company does well. When it does wrong, when it defrauds its investors or physically harms its customers or is part of the destruction of the environment, the CEO should feel shame. He shouldn’t be able to sleep at night until he fixes the problem.

Overseeing a corporation is a privilege. If he doesn’t feel bound by the rules of civilization, why should protesters?

Posted by Peter | Report as abusive

Steve, it’s not only a Republican situation. Chris Dodd and Barney Frank are democRats. The democRats have had as much to do with this as the Republicans. Both parties are shills for the corporations.

Posted by RFL | Report as abusive

I have worked around the world and can offer some real insight on the ethics debate. The simple fact is this: there are only two things that will guarantee a better outcome: the government needs to use the proceeds of taxation effectively and to never allow the economy to outsize the actual back-up wealth (gold bars etc.), and you only get better behaviour from better people. Far too many people going into business have never served in the military, or done anything remotely close to character-building. They start out as greedy, self-serving people, and they go into business like that. As a society, we need better people and only through a draft will we get it.

Posted by Bob Macdonald | Report as abusive

AGreed James, but the existance of Laws is no guaranty of obiedence to them and from that perspective it appears the US SEC has become a legal debating team and is missing out important pre-madoff level large examples that can be made for the market place. Of course as our new Legal Debating Team, debates, the victims pile up and continue to suffer. The best cure for the neuvo-insider VC-dealing is jail but that just doesn’t happen to the big-guys since Boesky. With every Bull Market there is old-school ‘dirty business’ and we certainly should not be cheering it like we are Eric Schmidt and his You Tube Scam. I think the realtionship with Schmidt is the biggest mistake Obama has made and it obviously gives schmidt a feeling of being ‘untouchable’. So when his company has to pay, he takes his ‘dear sweet time’ cause he knows he’s never going to go to jail for the crime.

Sure doesn’t set a Law and Order standard to the world that knows. Time to fire the guy and make sure that if he appears on CNBS again its in a mug shot. Schmidt is the Milken of our generation who obviously has no remorse or consideration for my family, which we all know he destroyed with INTENT.

Everyone knows and that’s why Schmidt in the news makes the US look so bad around the world. It’s the internet era, we all know who the bad-guys are and his dirt stinks up the whole global room.

I agree with your analysis and thoughts but lets not forget that the people likley to develop all of the safeguards the average coinsumer/investor requires are also teh same pople that were also complicent in the massive collapse of the global finacial system. Just the mere fact that money has been dirt cheap for years (a gift from the governement and Mr. Greenspan)and every adminstration going back to Bush senior have been pushing for more people to own homes also contributed to the mess we are in right now.

So yes more rules and market transparency are required but not only inteh private sector.
Thanks and good article.

You’re right on, Mr. Saft. Relying on an ethical code alone just won’t cut it. Humans are the most prolific predators ever to evolve on the planet and many don’t mind what happens to the prey so long as they don’t have to personally witness the results. Others don’t care one way or the other.
History is replete with rulers who have murdered millions in the name of righteousness and colonialism is a good example. Label the indigenous peoples as “savages” and kill them to save them. I mention that because when we allow the wealth to pile up at the top in the name of “free” markets and capitalism (as opposed to that often invoked label of “socialism,”) many people die if for no other reason than lack of health care.
I’m certainly not for all-out socialism but we definitely need to straighten up our house and that will require new rules and regulations.

Posted by Ray | Report as abusive

In Australia we have quite strong prudential regulations.These have saved our financial system from the carnage of the first wave of the financial tsunami, as to how we are going to get on in the next 12 months is another question.
The talk of free markets and business ethics is only a front for greed then panic, when inevitably you start selling or borrowing money on “securities” that you cannot identify their real value or even their origin.
Regulation is a must as it is the only way to quantify a market and idrntify the securities and derivatives that trade within this market. As well how these securities and derivatives are traded needs identification. It does not prevent trading just creates order and accountability to the process. A free market never exists, it is influenced by a myriad of factors internal and external that influence and corrupt “free” to the extent that free becomes an euphimism. Worst of all those who have no say in the process are the ones who are sacrificed at the altar of the free market.
Governments are obliged to regulate. In the process of unravelling the mess, they have to pour vast amounts of money into the system to prevent collapse. Tax payers then are burdened with the cost- social and economic- for generations. It is irresponsible to all concerned that the process has no checks and balances. This is a global issue as no member of the world community escapes the cosequences. One countries regulation does not insulate it from the flow on of anothers failure to do regulate.
Ethics are an excuse for not doing what has to be done.

Posted by Michael Phillips | Report as abusive

You give up too easily, Mr. Saft. We have plenty of ethics and plenty of regulation; what we lack is backbone. We have all we need to start arresting fraudsters by the trainload. From the lowliest liar to the almightiest master of the universe, we need to be rediscovering the meaning of law that was so conspicuously trampled during the Bush/Cheney/Rumsfeld years. What I don’t get is why no pundits are screaming for their hides? Accessories before and after the fact? Complicity? Guilty conscience? Or maybe the rule of law is simply dead. If so, then welcome to the era of gangster capitalism if it has not already arrived!!

Posted by Jonathan Cole | Report as abusive

This is a multi level issue

There is a way to avoid unethical / criminal behaviour in the broad business community including the financial sector which is riddled with sharp practice. The regulators must banish any scheme where the underlying rules and costs are not completely transparent and fail to conform to prescribed set guidelines.

Banish the use of small print in insurance contracts, investment products, consumer sales contracts, etc, and create a situation where what you see is exactly what you get. The words “Conditions Apply” should be discontinued in all advertising. Simplicity must be paramount because most of the people being hurt by these practices are unsophisticated and very easily misled.

At the same time the regulators must look at the more sophisticated “products” like derivatives, ETFs, options,futures, etc, and gauge to what extent they have contributed to the current crisis. If it is felt that abuse of these products is a factor then they should be banned if they cannot be properly controlled. Regulators must ignore the wails of protest from vested interests. Rather allow unscrupulous financial practioners to lose their jobs than create more misery amongst the unwary

While the rules of the game are being changed, there should be global campaign which warns the man in the street and investors to stay away from products and shemes which they do not fully understand.

Posted by anton kleinschmidt | Report as abusive

Maria Ramos is CEO of Transnet, a Government Parastatal (See Utube above). She is effectively employed by a government whose first choice for the next President of South Africa is facing criminal charges for alleged fraud and corruption. In the context of this blog it is encouraging to hear her personal views on values and behaviour

Posted by anonymous | Report as abusive

You are an American. You do not understand what is coming in Europe because you never read Karl Marx, San Simone, Engels or Weber; and do not grasp that Adam Smith and co. are less relevant to European thought on economics than a dead fish. As the USA model of Neo-liberalism crashes and burns–all US banks are currently insolvent– in the near future Democratic-socialism will march ever forward and destroy your influence on the civilized European world. Asia never really followed the game plan and that’s why they are winning the industrial ponzi scheme. The Chinese are Neo-mandarins and the Russians Neo-tsarists. Americans are bankrupt Reaganite fools.

YES! America is a back water of obsolete bankruptcy–just watch what unfolds!

R. Nemo.

Posted by r. nemo | Report as abusive

Prudential regulations and ethics aside, what about ethics in government; specifically the giving of large political donations for favorable outcomes to the donor later on. Such practices interfere with free market practices and skew prices for the benefit of interested parties [ both government and investors ] at the expense of the private consumer. This particularly occurs when property developers, lenders, owners of the media and government become inseparably intertwined in manipulating the equilibrium price of a once perfect market. In a large way it is these economic players who have also exasperated the current economic malaise with their immoral actions. Ethics equates to greater transparency in governments and with investors and more importantly, their relationship.

Posted by George Moses | Report as abusive

I watched (reluctantly). Who is this Maria Ramos? Her lack of understanding of the relationship between the Normative Discourse (values) and the Empirical Discourse (that what we can measure), is scary… and strengthens your argument that we cannot rely on self-regulation and business-defined ethics alone to repair the situation. Values cannot be measured (that is first year university stuff).

I fear that enterprises have existed in a value-free zone for so long, that they would not know how to find the way back to the ‘path’ on their own. They need help.

The values that work best are those that are prescribed authoratively… aka policies, practices, procedures, laws, regulations, etc. This should be a global prescription and enforced on every continent. Our recovery should be based on this.

And we’d better get to work – before the next credit-crunch hits us.

Posted by Quintin | Report as abusive

Mr. Saft, I agree that the focus on the ethical problems is one of several diversions from examination of the real problems. I fear that, because we have declared an economic emergency, examination of defecit spending and the increasing concentration of political and economic power at the federal level will remain off limits until too late. The discussion process and actions we are seeing reminds me a lot of what happened after Bush declared we were at war against terrorism.

Posted by Gary Leeper | Report as abusive

As Mr. Saft correctly pointed out, we should take Human Nature as an independent variable. There is nothing that can change or even slightly alter our basic animal instincts in the short to medium run. So, this is clearly an issue of regulation adjustment and regulation cohesion. It is about raising awareness to the victims and the perpetrator of the consequences of their actions. There is not much that regulation can do directly. The behavior of investors and bankers CAN change if expectations are adjusted. Let’s not be so pessimistic about this financial mayhem. It is not about strict and broad regulation. It is about clear and easy to enforce one.

D. Georgiou

Ethics is in fact the root of regulation. In one sense you’re correct that ethics without regulation would have little value. But ethics is at the core of the issue. Regulators were more concerned about maintaining the IMAGE of regulation while not actually doing the work. Say what you want but the Madoffs of the world don’t do business under a watchful eye.

Regulation alone is also not the answer. You can make a regulatory system as stringent as you want but it will only achieve one of two results. The more complex the rules the easier they become to circumvent. If the rules are too restrictive they will choke the life out of the market.

But one could use the letter of the law as an outline which establishes an example of violation. And then compare the INTENT of the law against the outcome the actions in question. The idea is to get rid of ambiguous distinctions.

For example, credit default swaps (CDS). A CDS is supposed to work like an insurance policy that pays debt if the company under it’s protection is unable to do so. But if it were called insurance it would have to be regulated so it was called a SWAP.

So even though it looks like a duck and quacks like a duck, wall street called it a “gofer”. And that was good enough for the regulators. There’s an example of the ethical fault on the side of government. Wall Street’s ethical fault was of course, creating this kind of crap in first place. They knew what they were doing and skirted around the rules. And now it’s time to pay up.

Ethics must be actively used in the creation and interpretation of the law. Ethics is principles based. Law is technical. Therefore use the principles of honest fair value exchange. And craft laws that reflect this. Fairness and value are subjective, and so the country as a whole must be on the same ethical page if this is work properly.

Posted by Benny Acosta | Report as abusive

Asking our goverment to regulate business is like asking Jesse James to regulate Billy The Kid.

Posted by kelly p | Report as abusive

The work of Oliver Williamson et al outlines the contractual approaches to curbing short sighted, ill informed, opportunistic and selfish folk, such as most of us; i.e. working with what we’ve got.
But there is a broader ethical issue. To develop ethics, the consequences of wrong doing need to be experienced. Otherwise it’s just hot air.
The U.S. has been on the greatest credit binge in history, and most of the money has been wasted. On a planet where 30,000 kids a day die of easily preventable sickness, maybe there should be some consequences – ethically speaking?

Well, ethics is just self-interest in its Sunday Best clothes, isn’t it? I seem to recall James Saft lives in London – this weekend, thanks to a industrial dispute in the building industry our TV screens have been full of a slanging match between those people who reckon that protectionism is ethical while free trade is unethical, and those who believe the exact opposite. They can’t both be right.

Regulation allows to write down a set of agreed rules. Enforcement allows us to implement them. We could do with more regulation, and we also could do with a whole lot more enforcement (think about all those rogue traders, or the rating agencies, or some of the more hair-raising mortgage scams).

The long-term problem is that there’s a whole sub-industry of highly paid, highly motivated people inventing new financial instruments which skirt around any existing regulations. So a proper solution requires both regulation and enforcement to be much faster moving than they are at the moment. Sadly for my desires for instant fame, I’ve no idea how we might achieve that….

Posted by Ian Kemmish | Report as abusive

I’ve spoken my piece regarding ethics…All I can say at this point is that the unethical will be found out eventually, they can’t run or hide what they’ve done forever. All I can say is it’s a shame that it has to go this far before people start speaking up about unethical behavior.

Posted by Damian Palmares | Report as abusive

Nice discussion about ethics, however one should realize what the practical situation : in most countries the experience shows that no major project contract is signed without some party , either in company or government is gratified with some benefit. It is not an apologetic discussion that will right this, only if companies are prepared to forgo revenue change will come, we all should look out for the volontairs, which in practice are in short supply

Posted by John | Report as abusive

When the IMF decides to assist a country, it dispatches a “mission” of economists. These economists frequently lack extensive experience in the country; they are more likely to have firsthand knowledge of its five-star hotels than of the villages that dot its countryside. They work hard, poring over numbers deep into the night. But their task is impossible. In a period of days or, at most, weeks, they are charged with developing a coherent program sensitive to the needs of the country. Needless to say, a little number-crunching rarely provides adequate insights into the development strategy for an entire nation. Even worse, the number-crunching isn’t always that good. The mathematical models the IMF uses are frequently flawed or out-of-date. Critics accuse the institution of taking a cookie-cutter approach to economics, and they’re right. Country teams have been known to compose draft reports before visiting. I heard stories of one unfortunate incident when team members copied large parts of the text for one country’s report and transferred them wholesale to another. They might have gotten away with it, except the “search and replace” function on the word processor didn’t work properly, leaving the original country’s name in a few places.

Posted by LOUIS WOOLF | Report as abusive

Wow…if that’s true then why even fight it…maybe we should just take up our arms and this world should be run by someone who would take care of the under privileged…this is pretty unbelievable if you ask me. Get rid of the people who want to take their work to that level and get rid of them entirely. It’s pretty unbelievable when you leave the world to the folks that are only concerned with advancing their career and don’t care about who they run over or to what extent the data they are providing may affect a certain country, in hat case Louis. Look where we are at right now…the “brilliant” folks at Wall Street, London…worldwide who want to advance their countries and have no care about anyone else in their world…we should just start over. Bring in new people…that wont be influenced by this kind of crap. We are at their knees right now unless we come together…the G20…our Governments…they need to put a stop to this. This incompetency needs to stop before we are all looking at each other thinking ….what now…once the entire world collapses and we are at war. Stop the protectionism….we are so wrong, the U.S., for trying to put that into legislation…all it is going to do is bring the rest of the nations against us. Lets solve these problems here first…there is a fix and then move to global cooperation, not protectionism.

Posted by Damian Palmares | Report as abusive

Are we really that dumb you guys? That you can’t see the protectionism coming if you put that into a stimulus bill…we don’t have the manufacturing base to “buy American” since our greedy corporations started outsourcing all of our manufacturing and factory jobs overseas to people who will work in a factory for $3 a day….are u kidding me? And then you say “BUY AMERICAN”…we don’t have anything that is American anymore except a failed Automotive industry that can’t get a handle on design and fuel efficiency…it almost makes me wonder if it has been done on purpose? Oh wait we have Wall Street…they can make us some money…oh, maybe not they took it and lost a huge huge unforgivable amount of our money and are laughing at us as they dole out billions of dollars of our money in bonuses. Nationalise everything..someone is out to get us, the honest people, and if we don’t stick up for ourselves we will all be living in shacks begging and praying to get picked to go work in the factory for $3 a day.

Posted by Damian Palmares | Report as abusive

It is good to vent frustration, but if you do not start with a good code of ethics, or code of conduct, as the backbone towards regulation you will ultimately failed if you rely on a rules based approach only. Finance is too complicated. It has to be. The world is a complicated place, and finance does not exist in a vacuum, but is instead based on the many hundreds of thousands of transactions and prices that take place in the real economy for goods and services.

Transparency? The average initial private offering or bond issue comes with hundreds of pages of disclosure. Even an average annual report can be a hundred pages. A term sheet is not a substitute for an investment circular. And by definition an abridged term sheet cannot point out all market and legal risks under all circumstances.

Investors, professional or otherwise, accept those risks when they purchase a financial security. To pretend otherwise is just naive. Too lazy to read the fine print? Well, even if you are not you will find many paragraphs and warnings to the various risks you are accepting by buying the security. So read the official filing twice if you want. You are still accepting the risks if you choose to buy. Risk is the flipside to yield and return. When you invest you accept both.

Posted by MrBill, Eurasia | Report as abusive

What is needed is a stringent criminal code for those that destroy the lives of thousands

Posted by louis | Report as abusive

Sorry, I was just venting my frustration at the whole situation. And yes Bill, you are right that the investor is aware of the risk.

Posted by Damian Palmares | Report as abusive

We need another Cromwell a Lord protector once more
If Westminster is no longer fit for purpose it is a waste of time trying to re-introduce integrity
A gentleman wilding an axe once more on Tower Hill might
introduce some serious thinking in the corridors of power Halk a dozen should be enough

Posted by H I Manning | Report as abusive

Under the auspice of tighter regulation imposed by complex and costly organisations such as the FSA the fee earners and the bonus bandits hoodwinked the novice regulatory practitioners. The saying “big is beautiful” came true. Regulatory practices and costs forced the small operator, who mostly sold a “sincerity package” to win customer affection, out of business leaving the field clear to those who could manipulate the rules and regulation with weasel cunning. They (the big boys)had the money and the tactical advisors to do this whereas the small IFA and fund manager only had time to comply and a conscience that curbed misadventure.
The call for simplified products is paramount, maybe this way the regulators will be able to identify over extension and a feast that is only served at the end of the table. However, if you pay peanuts you only get monkeys so instead of novices overseeing the mighty would it not be a good idea to impose the duty of regulation on those that know the industry best and allow them to stand in judgement on each others investment and funding practices in much the same way OPEC controls a valuable world commodity.
Councils do work where as regulatory authorities will never be able to recruit knowledge where it matters. They at best, are amateur game-keepers. Right from the very beginning the FSA failed with the malfeasance of Michael Bright of the Inependent Insurance Co – they just don’t know what they are looking for so choose easy, small targets for self justification. My call is to put the bankers and fund managers into an ethical role and ask them to take time out to serve the poor !

Posted by Max Burgess | Report as abusive

Truly Max, maybe then they will realize what they have done is wrong and make amends to the public, who is very suspicious of the banking and financial industry, the government and our World leaders right now. What we need right now is action, something needs to be done to appease the public and give them some piece of mind. The TARP money that has “disappeared” needs to be found and people need to be held accountable, and you are right in saying that our regulators now, over the financial industry at least, are underpowered, under funded, understaffed and lack the intelligence to fight these “big boys”. Someone said their average salary is $50,000 a year. In all honesty, what do you expect with a salary like that, you wont get the top talent from business schools because they are money motivated, unfortunately, and know they can make ten times that in the financial industry with their networks and will continue to do so until we stop them.

Posted by Damian Palmares | Report as abusive