On Financial Regulations

The aftermath of the financial crisis, has seen nothing short of a veritable crusade against the financial institutions around the world. The primary weapon used: financial regulations. Looking back however, financial regulations are not new and have been extensively used in the past. Yet, every financial crisis, including the most recent one, has eclipsed the ones in the past (minus the interventions).   One item that is completely missed is that regulations tend to focus almost exclusively on the supply side of the supply/demand curve. What they fail to address is the inherent demand that exists in the investment/consumer community. In numerous other applications, addressing the supply side without curbing the demand side has not led the required outcomes (look at drugs for instance).

In short, as long as the demand exists, innovations in new supplies (financial instruments) will emerge to satisfy them. The major question is, how can the demand be better managed, through regulation or other methods. This is a questions I continuously think about. Further comments to follow.

Regards,

Omar Halabieh

Disclosure: Long C and NYB.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s