The recent election is said to have shown how America is changing. Wall Street is changing, too, and some say so must the conventional wisdom surrounding it.
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There are now two predominant views of Wall Street. An upcoming test will quickly and easily tell us which view is accurate.
One view is of an industry unduly oppressed by overregulation—a hyper reaction to the 2008 financial crisis.
The other view is that the power mongers who run global megabanks have lost all sense of perspective, including the fact that they have greater access to powerful political figures than any other sector has ever had.
The test lies in the upcoming appointment to head the SEC. Current head Mary Schapiro is widely expected to be stepping down soon.
The president could appoint someone close to the industry to take her place. Or he could pick someone who is not only willing to strictly enforce the law but also would actively seek to change the conventional wisdom around finance.
An example of that conventional wisdom is that if we relax capital requirements, the economy will grow faster and that growth will be more sustainable.
This is exactly what Europe did up until 2008. Officials at the FDIC prevented reserves from being depleted in like fashion in the US but there is little doubt that lax regulation was a factor in the 2008 financial crisis.
To make Wall Street healthy again, many say that implementing new regulations is not enough. The thinking around the entire financial sector needs to change.
Only by considering all aspects of how investors are treated and uncovering all areas where financial risks may lurk will we restore the full confidence of investors
What are your comments on the matter? What do you think it will take to restore confidence in the financial system?