A lot people are surprised at how far our new president has gone to propose regulations over the financial markets. Clearly, times are changing for the entire financial industry. Bonuses are being targeted to firms that have taken federal bailout money. The government is now pressing banks to shakeup their boards. A transaction tax may be implemented on all stocks and bonds sales to pay for bailout funds. And now the tradings of derivatives will be regulated over central clearing exchanges. Clearly the new administration is trying to regulate risk and speculation.
On the one hand, it seems like the administration is out to punish the industry for sins that have caused the financial meltdown. On the other hand, it is trying to stimulate the economy by encouraging lending. Ultimately, risk taking must return in order for the economy to get moving. Further regulation will only confirm that risk taking in this country will never be the same again. It will also confirm that the poor administration really has no clue about what drives financial markets.
History has shown markets that encourage risk and speculation thrive and grow faster while those that do not ultimately wither and die.
Speculation and greed will never disappear from humankind no matter what kind of regulations are put in place. It is only a matter of finding that next frontier where all of this can happen. There will be plenty of countries opening their doors and taking advantage of this rare opportunity. If our administration doesn't realize this soon, the US financial markets will not be premier place to do business. There already is a scramble going on among a lot of firms that are looking to move out.
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