Monday, January 05, 2009

NYT on The State of Finance Yesterday

Originally picked up on via a BoingBoing post, the NYT has a pair (designed to be one read) of Op-Eds about the state of the financial meltdown:
If you've been reading things like the FT and Economist all this time, none of it is going to seem new in any way, but it's a very concise (for 2,000 words each that is) overview of some of the salient issues.

In terms of their prescriptions, a few very brief comments:
  • They specifically mention the Spanish regulatory policy on capital (more in good times, less in bad). This is a quite common prescription at the moment.
  • Regulate CDS contracts. I personally believe that this is due (having done software development for a pretty major player in this space, I'm familiar with quite a few failures in the way the market itself works) in some form (where that form does not mean that the NY State Department of Insurance should be in charge of a global market). Just don't assume that "regulation" means "market minimization." The market needs to be more efficient, and regulated, but not just plain-old shut down.
  • Apparently, regulators need to get smarter. The only country that I know of that has really attempted to tackle the public/private skills gap is Singapore, which has an explicit policy of paying civil servants what they would earn in private firms. This will never happen in the US (can you imagine someone justifying paying a 25-year-old working for the federal government $300,000+ per year? I didn't think so). Smart people follow money, and you can either give them the money up front or have a pot-of-gold at the end of the rainbow. Arguing specifically to eliminate the pot-of-gold at the end of the rainbow by shutting off SEC->Wall Street migration just makes SEC work even less desirable for people with the skill set to be able to do it effectively.
That's all. Seriously. Go read the articles. They're pretty good writing even if I disagree with some points here and there.
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