Posted On: January 14, 2009, 2:24 pm CST

Posted By: crabber

I used to be against regulation until I learned more about it. Modern business is too complicated to categorically support either position (more vs less regulation). Regulation that promotes transparency is good because it enables investor confidence, however it can certainly go way too far and impose undue burdens on the business and have unintended effects. However, too little or ineffective regulation can allow greedy businesses to come up with creative ways to obscure what they are doing - think Credit Default Swaps. Even if we give them the benefit of the doubt, the financial instruments were so complicated that complex analysis and rare expertise were needed to analyze the risks involved. The theory that markets self-regulate is entirely dependent on the assumption that the markets have all the information and understand the implications of what is being done. In actuality, investors rely on unbiased, expert analysis for guidance. If the analysis is neither expert nor unbiased, then the market will not work smoothly and volatility results.