How to avoid problems in banking in the future.

houtiger · Sep 16, 2008

This guy is on the right track.

In April 2008, HCM published a controversial essay entitled "How To Fix It," in which we outlined our (unsolicited) recommendations for how to correct the excesses that led to the credit crisis that began in mid-2007 and brought us to this historic day. We are republishing that issue of the market letter by attachment for those who did not read it the first time. Our key recommendations, which seemed much more radical in April than they do today, were the following:

* Improve financial industry regulation and replace substance over form in the regulation we have.
* Place absolute leverage limitations on financial institutions at much lower levels than the 30:1 levels that led to this crisis.
* Place an absolute limitation on hedge fund leverage.
* Regulate Wall Street compensation by basing it on multiple years' performance, add clawbacks and high water marks, and limit cash compensation that is paid out and weakens these firms' balance sheets.
* Tax private equity firms' carried interests at ordinary interest rates rather than capital gains rates and restrict private equity firms' ability to go public.
* Outlaw off-balance sheet entities.
* Reinstitute the uptick rule with respect to short selling.
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http://www.safehaven.com/article-11249.htm

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How to avoid problems in banking in the future.

houtiger Founding Member

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