More Scrutiny on Wall St?

About a month ago, when the US Government and the Treasury Secretary, Mr. Henry Paulson, started insisting on greater transparency in Middle and Far Eastern Sovereign Funds, which had lent and in the process averted some part of Wall Street’s collapse, I was ticked off. I understand the motive behind this insistence – to prevent the governments backing these funds to use this as a political weapon or a bargaining tool – but I felt that we were not in a position to dictate terms, not exactly because we were beggars trying to choose, but let’s face it, we were almost there. With nobody at home trusting Wall Street with their money, banks had no other option but to look outside. And look, and lick, they did.

It normally annoys me, and a horde of others who swear by capitalism and the markets’ innate ability to take care of themselves, when the government asks Wall Street to bend over because it deserves a spanking or worse yet … you get the picture. Well, that’s what we are taught day in and day out, or was I dozing in those classes? But then, don’t we also study that kids and minors are not capable of making intelligent decisions and that in the eyes of the law, they aren’t capable of entering into enforceable contracts? Now what do you call a bunch of supposedly well-educated, smart, A+ personalities, who squander away a few hundred billion dollars of investor money? Is it just hard luck or would you call them juvenile idiots? Perhaps for the first time, I am inclined to support Mr. Paulson’s endorsement of more scrutiny of Wall Street’s investment practices. If the government can urge foreign funds to disclose their motives, what prevents them from doing so at home? Especially now, since you and I, US taxpayers, have unwittingly written an insurance policy to these kids playing in their sandboxes?

Senator Obama was right this morning when, speaking on the US economy, he said that instead of encouraging sensible reform that rewarded success and long term sustainable growth, we have too often excused and embraced an ethic of greed and cutting corners. The result is the peril we are seeing today. The government indeed has a role and an obligation to ensure transparency and fair competition, and in times such as these, if that means more scrutiny on Wall St, so be it. The challenge however will be to ensure that the over-enthusiastic lawmakers in Washington don’t take this opportunity to send us back in time to an era of regulation.