I wrote the following summary of problems with present approaches in N.Z.......


Regulatory Design Failure in Capital Market Reform in New Zealand

1. The contention of this submission is that attempts to improve the performance of the regulatory regimes for capital markets in New Zealand suffer from an inadequate consideration of regulatory design options and thus new initiatives, as they are currently conceived, are likely to prove costly and ineffective if reform efforts do not address this flaw.

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The contributor to Econ Talk - (see Cafe Hayek) is an unknown person called Mark K wrote the following accurate, timely and well articulated piece:

Opening stab....

"These jokers on Wall Street, who according to Russ made ‘innovative’ products like credit default swaps, showed us unregulated free market capitalism in all its glory."

To which Mark responded......

"The notion that we have an “unregulated free market” is false.

If we had an unregulated free market, the organizations and individuals that made stupid investment decisions...

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From the ponder-worthy Felix Salmon (via Tyler Cowan):

Ray Pellecchia is right: if Harry Markopolos had taken all of his evidence about Bernie Madoff and put it on a blog, instead of submitting it to the SEC, there's a good chance that would have been the end of Madoff right there. All the time Markopolos was talking to the WSJ, trying to get them to run a story about Madoff, would have been much better spent setting up an anonymous Wordpress blog and just putting the information and analysis out there himself

Thinking about financial regulation is, at present, especially scrambled and, worse, the view is obscured by an enormous amount of rent seeking. Here is sharp set of insights and some inventive ideas.....

The inappropriateness of financial regulation

Avinash Persaud
1 May 2008

From this EU economists site:


Financial regulation never works the way it should. Here one of the world’s most experienced analysts of the global financial system presents some remarkably clear thinking on why we should not just do more of the same. An alternative model for policy action is proposed.

I have had the misfortune or fortune of being up close and personal with seven major financial crises in my banking career, from the US Savings and Loans crisis of the late 1980s to today’s credit crunch.

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This from Sebastian Mallaby via Marginal Revolution:

"The most striking fact about the ongoing financial mayhem is that it is concentrated not in lightly regulated hedge funds but in more heavily regulated commercial and investment banks. It is banks that created subprime mortgage securities. It is banks that mispriced them. And it is banks that filled their own coffers with this toxic paper, losing hundreds of billions of dollars. A somewhat breathless March 31 Financial Times article proclaimed the closing of the worst month for hedge funds since the collapse of the infamous Long Term Capital Management in 1998. But the average fund tracked by the Chicago-based firm Hedge Fund Research declined by a mere 2.4 percent in March, bringing the cumulative fall for the first quarter of 2008 to 2.7 percent. By contrast, the bank-heavy financial services component of the S&P 500 fell 12.3 percent in the first quarter.

Hedge funds, for the most part, have weathered the storm remarkably well."

The record for regulation then is poor, it has failed to assist in the U.S. commercial banking sector at least.