March 15, 2016

Has the SEC really shown such merits that Patrick Jenkins has to stand up in their defense against bullies?

Sir, Patrick Jenkins, in “SEC should stand up to asset management bullies on liquidity risk” of March 15, writes that some “even accuse the SEC of attacking the very essence of American free markets”

Those “bullies” are right! Risk weighted capital requirements is something totally incompatible with free markets, whether in America, Europe or anywhere else.

And let us not forget that the main reason the investment banks supervised by the SEC suffered more than the commercial banks supervised by the Fed and FDIC, was that in April 2004, the SEC gave in to the Basel Committees' capital requirements.

That some “blame the SEC’s poor regulation…for the risk that exists in the system”, is not something outlandish.

In November 1999 a began an Op-Ed titled “About the SEC, the human factor, and laughing” with: “A couple of days ago, SEC reported that their pension fund had also been the victim of a fraudulent stock-managing firm, and that they had lost a lot of money”. And I ended it with: “the possible Big Bang that scares me the most is the one that could happen the day…regulators… playing Gods, manage to introduce a systemic error in the financial system, and which will cause its collapse.

I have no idea why Patrick Jenkins goes out defending the SEC with his “415 pages of often technocratic proposals, the regulator suggest some sensible mechanisms to mitigate the fast-growing risks in the fast-growing asset management industry.”

Any regulators who have to write 415 pages to propose some partial solution, is only working for himself and for friendly regulation consultants. I am sure those 415 pages, which I have not read, contain all type of dangerous distortion and gaming possibilities.

@PerKurowski ©