View From Lodi CA: Wall Street: Do Investors Need More Regulation Or More Common Sense?


Several months ago, a credit crisis
brought the investment bank

Bear Stearns
to its knees, created billions of
dollars in losses for

Merrill Lynch
as well as other security firms, cost
people their jobs, and dried up the
home sales market.

In light of the red ink and pink
slips all around, again critics again ask: should the
financial services markets be subject to revised,

more rigid federal oversight
as proposed by U.S.
Treasury Secretary

Henry Paulson
?

That`s a truly great question.

Having worked on Wall Street for
two decades, I`ve seen its machinations up close.
Because of my insider experiences wherein I witnessed
the creativity with which savvy bankers can separate you
from your money in the name of sound investments, I`m
initially inclined to answer yes.

But as an individual

opposed to government intervention,
I`m also
disposed to answer no.

The government cannot control, even
to the smallest extent, its own financial dealings.
Witness, as proof, its nearly

$9.5 trillion national debt
. Why would anyone expect
it to prudently oversee money matters in the private
sector?

Is, then, my response yes, no or
maybe? To answer, let`s weight all the factors starting
with an analysis of Wall`s Street purpose.

The Street—take the term in its
broadest sense—needs monitoring because it exists for
only one reason: to make money. Taken as a whole, the
financial community serves no esthetic purpose.

Teachers enter their profession to

educate the young
;

doctors
and

nurses
, to heal the sick;

journalists
, to inform the public and

policemen
, to ensure a safe community.

Even politicians when they first
embark on their careers aspire to improve their
constituent`s lives.

Those are—or should be—noble
occupations with dignified goals.

But not Wall Street.  The Street`s
mission is creating wealth—but not necessarily for you.

If you make a few bucks along the
way, that`s fine. But if you lose money, well—next
sucker in line, come forward please.

In the meantime, the various

sales representatives, traders and executives
happy
deposit into their bank accounts the revenues that accrue
from managing your portfolio.

To be sure, some righteous
individuals work on Wall Street.

But an industry that exists
exclusively for moneymaking should be policed.

Since the government, however, has
already failed across the board to protect investors
from the sharks, it is the entity least qualified for
that job.

The

multiple regulatory bodies
like the Security and
Exchange Commission, the Office of the Comptroller of
the Currency, state regulators and the

Financial Industry Regulatory Authority
who send
auditors to check up on asset managers and brokers,
missed all the crisis signals.

Does their collective failure mean
that we have too many regulators using too many
standards on too many financial instruments or too few
regulators, looking at too little information about too
few securities?

Paulson`s plan would consolidate and combine several
existing agencies as well as create a new national
insurance charter and mortgage commission.

Assuming Paulson can sell his idea, implementing the
reorganization would be a monstrous assignment and
ultimately ineffective. The new agency would become a
sort of financial

Department of Homeland Security
, with several
bureaucratic layers that accomplishes nothing.

Paulson`s objective is to protect
the small fish in the big investment pond. But how can
anyone believe that a new federal super-agency would be
any better than the old ones?

One of his supporters, Mary L. Schapiro, chief
executive officer of the

Financial Industry Regulatory Authority
, claims that
the average investor” finds it “nearly
impossible”
to understand the risks and is unable “navigate”
today`s complex financial services landscape.


According to Shapiro
: "Investors shouldn`t be
left exposed and confused. Retail investors should get
the same basic regulatory safeguards and protections no
matter which investment product they choose."

Although Shapiro endorses Paulson`s idea, she`s
actually making an excellent case for investor
self-policing.

If you, the “average investor” feel
“exposed and confused”
and are “unable to
navigate”
today`s “complex financial services
landscape,”
then for heaven`s sake, buy treasury
bills
.

They`re boring and yield next to nothing. But you`ll
never get skinned alive.

To survive Wall Street`s wild fluctuations, investors
should be guided by the oldest rule:

caveat emptor
.

Joe Guzzardi [email
him], an instructor in English
at the Lodi Adult School, has been writing a weekly
column since 1988. It currently appears in the


Lodi News-Sentinel
.