You Can't Control Animal Spirits

You Can't Control Animal Spirits - You Can't Control Animal...

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You Can't Control Animal Spirits By Arthur Levitt From the Wall Street Journal, Aug. 5, 2008 Financial regulators are in the unenviable position of being constantly second-guessed. In good times, when markets are on a roll and the economy is booming, the people that they regulate complain loudly that regulators are heavy-handed, over-regulatory, anti-business and get in the way unnecessarily. In bad times, times of crisis and economic turmoil, regulators are criticized for not paying enough attention, dropping the ball, letting excesses develop, and not controlling the people, markets and institutions for which they are responsible. Most recently, the regulatory oversight of investment banks by the Securities and Exchange Commission has come under question. Why didn't the SEC prevent the events leading up to the collapse of Bear Stearns? Is SEC oversight less rigorous than oversight by the Federal Reserve? New York Federal Reserve Bank President Timothy Geithner has gone as far as suggesting in recent testimony that oversight of investment banks be transferred to the Fed, and a new agency be created responsible for sales practices. There is no doubt that we are in the midst of a severe crisis. For more than a year, we have been inundated with media coverage of turbulent markets, profiteering, fraud, collapse and ruin. Adding to the maelstrom of actual events has been the usual finger-pointing, blame-laying and Monday- morning quarterbacking. There have been increasingly loud calls for action -- for someone to fix everything that has gone wrong. Quick fixes and knee-jerk responses generally do more harm than good, by creating new problems with every attempted "solution." When the Treasury and the Fed ensured that Bear Stearns shareholders would not benefit (and would, in fact, be punished) by the sale to J.P. Morgan Chase and the associated government
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This note was uploaded on 08/08/2011 for the course BUS 104 taught by Professor Johnson during the Spring '11 term at FIU.

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You Can't Control Animal Spirits - You Can't Control Animal...

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