In the days and weeks ahead, the Federal Reserve will no doubt support legislation to stop this scenario from ever happening again. It will not work. The real fix is the same one that has been around for a 1,000 years. It is called capitalism. Let these institutions fail. Tell their creditors they are on their own and push for transparency so everyone can see what banks like J.P. Morgan do. Finally, get out to the way and let the markets fix this problem. This would undoubtedly wreak havoc in the short term, but it will serve as a lesson to everyone in the future that taking such large risks has consequences.Regular readers know that requiring ultra transparency is the way to let market participants see what banks like JP Morgan do.
The FDR Framework is the backbone for a 21st century financial system. Under this framework, governments ensure that every market participant has access to all the useful, relevant information in an appropriate, timely manner. Market participants have an incentive to analyze this data because they are responsible for all gains and losses.
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Saturday, May 12, 2012
Add James Bianco to the list of those calling for ultra transparency
In a post on the Big Picture blog, James Bianco discusses the JP Morgan trade and observes
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