6 Simple Ways to Reform Wall Street

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from Yahoo Tech Ticker:

• Reinstate Glass-Steagall Separating banks from brokerage firms guarantees that “when Wall Street hits the wall… it doesn’t cause the banks to do the same,” says Ritholtz, who claims the Act was a major reason why the economy didn’t come crashing down along with stocks in October 1987.

• Repeal the Commodity Futures Modernization Act This rule “allowed derivatives to be exempt from all the rules that affect every other traded financial instrument,” and was a root cause of AIG’s problems, he says.

• Overturning the so-called Bear Stearns rule allowing leverage beyond 12 to 1 The SEC’s 2004 rule change, which eliminated some leverage restrictions on investment banks in favor of capital requirements by type of asset was a mistake, says Ritholtz. “Without overturning that, give us 5-10 years, we’ll be right back where we started.”

• Continuing to allow high-risk trades to be compensated regardless of profitability This issue is one already being addressed by the so-called Pay Czar Kenneth Feinberg.

• Regulating the non bank sub-prime lenders and mandating (and enforcing) lending standards This one is pretty self-explanatory and one few argue as a key reason for the subprime debacle.

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Source:
Forget Obama’s Speech, Here Are 6 Simple Ways to Reform Wall Street
Peter Gorenstein
Yahoo Tech Ticker, Sep 15, 2009
http://finance.yahoo.com/tech-ticker/article/330524/Forget-Obama’s-Speech-Here-Are-6-Simple-Ways-to-Reform-Wall-Street

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