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WSJ’s article Fed’s Tarullo Shakes Up Bank Rules states that: A regulatory clampdown could worsen the credit crunch or hurt the economy by excessively restraining Wall Street innovation.

Sorry I don’t buy that. The Wall St. crash of 2008 just blew away that argument. In my opinion subprime was not an ‘innovation’ we needed. Credit card rates at 30+% was not an ‘innovation’ we needed. And there are many more examples you can write down.

What was lacking was not the ability to innovate, but the willingness to innovate in areas where profits are sustainable.  For example, new technologies, new processes, new research, things that need real people to work on. Therefore to ensure that our financial services firms focus on economically sustainable endeavors we need regulations.

If you really believe that regulation will  hurt the economy by excessively restraining Wall Street innovation then look at Goldman Sachs. Their Tier-1 capital is now at 14.5% or about $1 for every $6 of assets . That is a serious amount of risk capital and they are not waiting for regulation, they have moved ahead of the regulators. So what is it they know, you and I don’t?

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Disclosure: I’m a capitalist too, and my musings & opinions on this blog are for informational/educational purposes and part of my efforts to learn from the mistakes of other people. Hope you do, too. These musings are not to be taken as financial advise, and are based on data that is assumed to be correct. Therefore, my opinions are subject to change without notice. This blog is not intended to either negate or advocate any persons, entity, product, services or political position.
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