Monday, May 10, 2010

My Letter to my Congressman May 10, 2010

It's that time!

Time to Write Your Congressman!

Dear Mr. Boccieri,

Please fight to strongly regulate (or eliminate banking usage of) derivatives -- basically my view of the banking industry of today is that they want this form of legalized gambling so they can continue their reign as American Royalty.

Without solid regulation we're going to be back where we were in 2008 -- I've been reading about some people saying things like "we don't need to regulate, we just need to let these institutions fail. Hey -- I'm all for that, but I know that when the time comes, without some solid regulation and change, whomever is on stick flying the plane of Congress that day will very likely do what's been done in the past.

I see the bankers lobbying Congress like crazy (it's in the news today). Of course they are -- they get all of the rewards of taking risk with none of the accountability.

Please do the responsible thing here -- regulate these overpaid non-capitalist leeches while the opportunity presents itself. End corporate banking welfare. Make them accountable for the incredible damage they've done to our economy. The lack of sympathy for America is illustrated by the incredible bonuses they gave themselves this year -- basically fiddling while our country burned.

End American Royalty -- be a part of strong derivative regulatory change. Restore some sanity to the financial markets. Make banking a less risky venture for the health of America. Add some kind of regulation that ends the role of our government in bailing out these idiots when they fail to do their job (managing risk is part of the role of a financial institution, and clearly that's where they failed).

Thanks for Listening,
--Paul Ferris


Johnny said...

Derivatives have benefited the economy overall- from the small farmer trying to mitigate the risk of a bad harvest to the multinational that it has become vogue to despise. Please read the following- it is a pretty good article. I encourage you to be wary of government solutions- they are the ones who are being accorded the absolute power that will be to our demise.

FeriCyde said...


I'm fully aware of what derivatives are. My main thoughts are this:

1) They have been used as a form of legalized, unregulated gambling.

2) Their mis-use in the recent crisis was pivotal.

3) Once the whole AIG crisis blew up and everyones' cash was rippling out of existence, they all went to congress with their hands outstretched, asking for our cash.

4) Up until very recently (1993 or 1994, can't remember), and after the crash of the 20's, they were regulated and the world did not come to an end.

Johnny -- we left these morally bankrupt people to their own devices with no regulation. They proved that they need a leash. Everyone who thinks that a lack of government intervention here is not needed is burying their heads in the sand.

We tried that -- it didn't work. It's time to swing the pendulum back. Those that think that the "free market" can regulate itself need to bear in mind that the louts will be back asking for cash the moment that their inability to manage risk falls apart again.

And it's not a free market -- in a truly free market, they would fail.

Sure, we can say thing like "let em' fail" -- the congressmen in charge at that time will (very likely) do everything that's been done in the past.

They will say stupid things about "too big to fail" and bail em' out again, in other words. Unless we make it illegal to do so. Unless we put in some regulation that does not exist today.

I'm wary of that regulation as well -- it's being written by people that are being lobbied to the 9s. It's being signed off on by people that have a demonstrated track record of not putting in good regulation in the past. It will very likely be overseen by people that have a demonstrated track record of not enforcing the regulations the right way.

But it's better than nothing, which is more or less where we are right now.

What's the definition of insanity? Trying the same thing over and over and expecting different results.

Look, it's insane not to put some financial regulation in place. Period. If you read my letter, I'm not saying "no derivatives".

I'm saying "no unregulated derivatives." Insurance is regulated -- and look at derivatives in this light -- They're very much like insurance instruments, I'm certain they can be regulated in some sane fashion. But you'd have to be completely barking mad to think that leaving things the way they are is going to lead us to any place other than where we just were.

In any case, thanks for sharing your opinion. It's not that we'll likely ever agree here, but it's always fun to Chat. ;)


FeriCyde said...

-- Exactly!

Johnny said...

I certainly do not advocate for leaving things as-is. In my estimation the pendulum has swung too far in the wrong direction (gov't control) and needs to be corrected. Insanity is trusting the parties that leads us in these disasters to free us. If government regulation and interference is lacking, what is the purpose of Fannie Mae and Freddie Mac? Is this obtrusive intervention? Why should the gov't get involved in underwriting morgages? Why should the gov't get involved in setting quotas in lending based on race?

P.S. I am somewhat surprised an open source advocate is not more liberatarian.

P.S.S. Please read Thomas Sowell's book, Housing Boom and Bust. He lays out the case against the government which, in turn, lead to the extreme practices seen on Wall St.