Here is former Fed Chair Paul Volcker on the big question: will consumers, investors and the economy be safer?
“By now it is pretty clear that it was faith in the techniques of modern finance, stoked in part by the apparent huge financial rewards, that enabled the extremes of leverage, the economic imbalances and the pretenses of the credit rating agencies to persist so long,” Mr. Volcker said in this remarkably candid talk.”
-How Mr. Volcker Would Fix It (NYT)
Volcker’s wish list includes further basic reforms: Making capital requirements tough and enforceable; requiring derivatives to be standardized and transparent, and ensuring that auditors are truly independent by rotating them periodically. Last, he wants to shrink the Systemically Dangerous Institutions (SDIs), by reducing their size or curtailing their interconnections or limiting their activities.
In other words, bankers and the market cannot be trusted to self-regulate. Watch for the fools who claim otherwise . . .