Older derivatives have the same problem when they’re naked – selling options can have unlimited levered risk, yet naked options sales have been justified for liquidity much as naked CDS and naked short sales are justified.

Now THAT is interesting. I haven’t thought that all the CDSs were the immediate cause of our current crisis, but that the enabling of ‘destruction capitalism’ isn’t good. Perhaps it has been there for a long time, since options have been around.

Would we be better with no naked plays? Okay, stop snickering. I’m serious!

Merkel of Germany with their safety net are not bailing out the banks. G-20 will demand real regulations on the CDO/CDS scams.
Your thoughts?

America is different from European countries and we will not become more like them just because we were the source of *this* crisis. In many more cases we are the ones bailing out their bacon and they don’t see fit to reform to become entirely like us.

We should look at everything that’s gone wrong and regulate or ban dangerous things. The G-20 can watch how it’s done and watch our economy revive while theirs sits in the gutter.

Gary Gensler as head of the CFTC will fill a different kind of role. Gensler has no history with that agency and few ties to vested interests that might favor retention of the CFTC in its current form.

cannot be allowed to stand. While Gensler technically has no “history” with CFTC, in the sense of never working there, he most definitely has history with a company, Goldman Sachs, that had and continues to have a powerful vested interest in keeping CFTC toothless.

Moreover, while serving at Clinton’s Treasury Dept, he was fully on board with Rubin’s and Summers’s torpedoing of then-CFTC chair Brooksley Born’s attempts to scrutinize OTC derivative trading.

The issue of “vested interests that might favor retention of the CFTC in its current form” strikes me as a red herring. The key issue regarding the SEC and CFTC, whether merged or separate, is whether they’ll be manned by people with the authority and motivation to brutally regulate the private interests (I refuse to call them “industries”) under their purview. Bernie Sanders is SO right to be moving heaven and earth to keep Gensler out of contention for CFTC.

Again, Jane, I’m sorry if this appears to be a shot at your guest and friend’s back. I regret not being able to post this point in real time.

Fixed it for you.

I see an evolving regulatory apparatus that parallels banking. If the “too large to fail” institutions are down-sized to “regional” entities, we as the consumers will see a direct benefit. Thus, the regulatory entity would be regional in scope, as well.

As to where the regulatory apparatus is installed or cabinet-level functionality, is ultimately, a political decision, and really of no consequence.

Consequently, I see a twin regulatory apparatus, “banking” and “non-banking” and operating on a regional basis. And across America, there could even be ‘nine’ regulatory/”banking” entities. And a similarity for the “non-banking.”

And given the ‘need’ for 60 votes, Voinovich of Ohio will become the ‘decision-maker’ since he has the juice to cross the aisle and vote with the Dems.

Furthermore, the SEC could be dismantled and everything cleared through the ‘regional regulatory apparatus.” The same could be said with NASD, and other assorted self-regulated vehicles that are operating in today’s environment.

Jaango

Would like to have asked whether:
– audit firms will also be assessed during a revamp of systemic risk, since they were one of the contributing moving parts;
– if a reevaluation of Sarbanes-Oxley reporting requirements might also be appropriate since exposures to excessive leveraging via CDSs and CDOs may not have been fully disclosed to shareholders;
– if legislation removing CDSs from insurance industry would be appropriate option since their use ultimately cost the system more than their value as as a tool for reducing taxes for participants; allowing CDSs to remain in the insurance industry only increases risk as well as need for regulation.