Posted On: October 20, 2008, 11:16 am CDT

Posted By: Jerry

This is a foregone conclusion that the financial services sector will be placed under a stricter regiment of regulation. The period of de-regulation will probably be delayed for about 10 years, as the government regulators and the sectors sort out the damage of what has taken place.

Regardless of the cause of the wholesale sector failure, the simple fact remains that US taxpayers now own majority stakes in AIG, Fannie Mae, Freddie Mac and probably soon several major banks. My current belief is that the market failure resulted from shifting regulatory guidance and efforts.

Whenever, regulators shift the basis or content of their regulations and change the regulatory perception to industry participants, a vacuum is established. The vacuum causes the industry and individuals to adjust their behavior. Some of this behavior adjustment results in less than desirable outcomes.


Whenever the paradigm of an industry is shifted, there are benefits and costs. This benefits and costs need to evaluated from a societal point of reference. Obviously, the costs from the current system of the Fed Reserve and SEC is perceived to be greater than the benefits derived from it.