Obama's WMD

[Tim Reucroft]

Why do politicians always make the same mistakes?

A re-introduction of Glass-Steagall was fairly predictable, the fact that it hits the wrong target was too.

Remember those hedge funds sponsored by Bear Stearns and Goldman Sachs where they made good some of the losses, well we don't want that anymore - let's cut them loose and they can sink on their own - we're not worried about investors with enough money to put into hedge funds - unless; hang on - that's my pension fund!

SMEs - remember when they were in vogue - because they're history now. No more private equity funds pumping capital into growing companies - that's strictly for China and India - we don't want any of that, thank you very much.

Not only has the pendulum swung to Asia, the intellect has gone with it.

The role of a bank is to intermediate risk - all sorts of risk - that means high risk as well as low risk. If you divide the banks into low risk banks and high risk banks - guess what? The high risk banks go bust, even more bailouts needed or capitalism is dead. Is this what Obama wants?

The solution is not to regulate the banks but to regulate those investors that buy inappropriate products. If we stop them buying the things they don't understand (this includes the retail investor ultimately sold a wrap product) then the banks ability to sell high risk products evaporates. Those that understand the risks are free to take them. If it goes wrong the banks have a clear conscience and the government has nothing to bail out.

Let the banks sell hedge funds and private equity