|Supervision is not always required to make money|
Here’s a short article about the difficulty of managing out-of-control financial markets. Peter S. Goodman makes the following points:
- Technological advances make it harder for watchdogs to recognize risk, or to do anything when they finally do notice risk.
- When banking is regulated, bankers merely find a way to "bank" outside the regulations.
- If everyone is making money while something is getting close to exploding, nobody cares.
- Innovative financial products hide their true risky nature.
- Regulators may have been duped by "financial institutions skilled at managing the perception of risk."
- Investments have become so complicated that nobody really understands them.
- The same institutions that could not stop the last mess are going to try and stop the next mess.
- The regulators and the Wall Street players are all from the same group… but outsiders don’t have the experience, so the same players keep playing.
If I summed these up into a shorter set of rules, they would be:
- Risk is hard to notice.
- When there’s lots of money, hurray!
- Complicated is hard to manage.
- The system that made the mess may be the only system qualified to run it.
Rule No. 1: Make Money by Avoiding Rules, at The New York Times>>