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Guest Post: New to FINREG - Financial Equalization Proposal Gaining Momentum
Submitted by Jack
New to FINREG - Financial Equalization Proposal Gaining Momentum
Thus far unreported, but quietly gaining momentum in the polls is the provision for Financial Equalization. Spurred on by the recent announcement of the SEC's inquiry into Goldman Sachs, legislators and soccer moms are gathering behind a system proponents claim will finally bring fairness and equality to the financial system.
The SEC investigation into Goldman has become a rallying point, a prime example of the corruption and inequality of the financial system.
At the heart of the matter is both the "amount" and "accuracy" of information in the possession of certain Wall Street firms. The Government is attacking Goldman for its participating in prominent hedge fund Paulson & Co's recently disclosed theft from the hapless counterparties ACA Capital Management and IKB Deutsche Industriebank. The facts clearly display how Paulson's alleged "comprehensive diligence" into areas such as the "economy, housing market, and specifically the credit quality of the ABACUS 2007-AC1 CDO" gave them a material, unfair, and in the opinion of many, criminal advantage over the counterparties. Paulson, Goldman and their cronies have made the claim that it was common practice for broker-dealers to seek input from market participants when assembling synthetic collateralized debt obligations (CDO's). Goldman and Paulson have dug themselves into a hole here and set a standard for which they do not want to be held. Their idea of "common practice" comes right back to bite them in the ass, for Paulson's illicit practice of gathering and analyzing relevant information was certainly not common practice - and rightfully so.
It is being argued that Goldman had an obligation to inform ACA and IKB "directly and explicitly" that their counterparty not only (1) understood the properties and functions of CDO's in general, but furthermore (2) had actively assessed the value of this particular CDO based on the probability of various cash flow scenarios.
Unfortunately, I think many of my humanitarian brethren are still failing to see the forest for the trees. Requiring explicit disclosure to ACA and IKB or other counterparties in similar scenarios is not the solution. First of all, these companies obey the letter of the law and not the spirit, putting the explicit disclosure in the same documents containing the structure and risks of the investment itself. The very same documents they already know their exploited customers don't read! Secondly, even if the SEC required the disclosure to be sufficiently conspicuous, painted across a life-size cutout of Nancy Pelosi kissing Lindsey Lohan for example, what would the disclosure really accomplish? The majority of investors and public money managers are honest, hardworking Americans - not some arrogant group of yuppies with the leisure to sink hours of time into research. Requiring nuanced diligence of investments panders to the plutocrats of this society who garnered the education, intelligence, and experience necessarily to evaluate these securities at the expense of the common man. Think of the massive inequality, the enormous burden on both corporations and individuals if Investors, individual or institutional, had to restrict themselves to investments they understand in order to get a fair shake in the markets. I loathe to even speculate what the overall cost to the system might be in such a dystopia. It simply cannot be allowed.
Enter, running, the proposal for Financial Equalization. In a stroke of brilliance, legislative aides have designed a system that prevents further abuses of information asymmetry without the enormous costs associated with a pervasive adoption of research and diligence. Given that the majority of investors and investment firms have neither the resources, desire, nor capacity for understanding basic classes of financial products (Stocks, Bonds, Derivatives), nor their individual investments within such categories, the logical solution is to "equalize" every firm and individual with even the slightest capacity for abuse of this type of information. Individuals will be assessed on a sliding scale and categorized based on their potential danger to the fairness and equality of the marketplace. While the full equalization criteria are still being discussed, there are already several items on the table. One example, individuals demonstrating a potential for abuse through "inference and logical reasoning" will be required to attend weekly seminars on topics such as "astrology", "faith healing", and "healthcare re-imbursement". Those with a tendency to analyze events in the global marketplace and see the larger mosaic shall have all channels restricted save the FOX business channel, and so on and so forth.
Most importantly, the proposal will also firmly establish that any transaction in which one party gains advantage over another will constitute prima facie evidence of a violation of the equalization guidelines. With this measure in place we can avoid situations akin to the current spectacle, where these pompous firms have the audacity to stand there and debate the case on points of law. Fortunately, even before the equalization legislature becomes law, these modern day robber barons will find no refuge in the law, as the judicial branch has also donned the colors of equality and anti-elitism. Chief Justice Roberts demonstrated his firmly anti-elitist position last week when he asked the poignant and thought -provoking question "What is the difference between email and a pager?" Clearly, a scathing and well deserved critique of the technocrats and their other erudite ilk. With all three branches of government and the majority of Americans lined up behind this proposal, the country seems poised to take an important step toward truly becoming a land of tolerance, acceptance, and equality - by finally kicking out those greedy capitalist pigs.
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...he forgot about mandatory inter-racial bisexuality.
Quite outrandish indeed. Cute, creative, and marvelously illustrated.
A shame it isn't truly fiction.
i like "outrandish". it's a thought provoker re: free market satire.
"Individuals will be assessed on a sliding scale and categorized based on their potential danger to the fairness and equality of the marketplace."
Soooo, another type of rating agency? Just kill them already, let God do his own work.
"One example, individuals demonstrating a potential for abuse through "inference and logical reasoning" will be required to attend weekly seminars on topics such as "astrology", "faith healing", and "healthcare re-imbursement". Those with a tendency to analyze events in the global marketplace and see the larger mosaic shall have all channels restricted save the FOX business channel, and so on and so forth."
Couldn't stop laughing after this paragraph. Because it's true!
Me no watch Fox. Me know watch T.V.
How 'bout you refute the ZH take?
Me interested.
(Please include FACTS and footnotes to support)
THANKS!!
Why wait for this law to take effect. Let's all move to North Korea so that we can be interned in the slave labor camps.
Try to remember the old axiom "Arbeit macht frei".
Why? You already are, I'm sure.
Never Again
http://www.youtube.com/watch?v=5XuVYerh3n8
"Individuals will be assessed on a sliding scale..............." I don't get it. Are we on a financial forum board or screening for a move in Santa Monica?????????
You don't understand. They're saying they're going to grade on the curve!
Shit ass funny!
Wow. What an idea. It has universal application as well. Teachers whose only career is reaching retirement, engineers who can't balance a checkbook, cops who can't even see their own junk (or shoes), the list goes on! Pick a career yourself -- and step on somebody's toes for sure. Even I could use a little of that there training. Maybe the "inference and logical reasoning" would be a good place to start.
Just posted a EURO monthly chart ...
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
funny.
Reform them into utilities.
Why don't we just require all morons to get barcode tattoos? Then we can have a moron tracking database to help solve the sophisticated investor definitional problem.
WELCOME TO THE MACHINE:
http://williambanzai7.blogspot.com/2010/05/welcome-to-machine.html
You and your Nobel Prize! You idiot!
http://www.youtube.com/watch?v=_gekaEzqj5g
How about this? Since we know politicians are so good at these types of things, we could have them approve rating agencies that simply rate investors at various levels of "stupid" or "smart." This would ensure that dumb investors would never have to unknowingly trade against intelligent investors. Of course this would ensure that trading would continue, virtually unaltered, at its present strong clip between your basic idiots and HFTers--the overriding majority in today's market.
But Paulson and others? Hold on to your gold, my friends.
Man, I can't wait to be able to trade paper fearlessly while drinking heavily!
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