Which of our two major political parties would be a better steward of our capital markets and financial system if left unchecked by the other party? I think either way, the result would be pretty scary.
The Republicans never met a business they didn’t want to deregulate and the Democrats never met an underprivileged constituent they didn’t want to force lenders to throw money at.
As an exercise, I came up with two different alternate realities, in which each of the political parties has complete sway over the financial markets, unfettered by the wishes or demands of the other. Have a vomit bucket nearby, no matter which way you vote.
If Republicans Ran the Markets:
Within the first week, the SEC is decommissioned.
The task of regulating the financial markets is added to the responsibilities of the Office of the Postmaster General. Mail Carriers are put through a rigorous 3 day training program focused on:
- capital markets
- insider trading
- electronic market-making
- investment advisory
- the role of specialists
When the postal workers fail, the regulation book is chainsawed in half at a ceremony on the corner of Wall and Broad Streets. The only rule henceforth is “Do unto others…” and even the enforcement of that is pretty lax.
Dick Cheney and Ted Stevens are named Director and Deputy Director of the NYSE. Pockets are stuffed, heads are turned the other way.
The Office of Thrift Supervision is informed that it will subsequently be more of a ceremonial appendage. It is relieved of it’s duties and 90% of it’s employees are offered Carnival Cruise vacation packages for a voyage that leaves New York’s harbor and never returns.
FINRA‘s staff, in charge of regulating brokerage firms, is allowed to continue as they are not a government agency. They are, however, forced to wear advertisements on their clothing promoting their corporate sponsors. The regulators go about their business of monitoring firms while emblazoned with the logos of Etrade, Morgan Stanley and Janus Funds.
Within one year, the Dow climbs to 33,000, 6 months later it drops to 2000.
If Democrats Ran the Markets:
Nancy Pelosi rings the NYSE’s opening bell with a leather riding crop, ushering in a new era of open-mindedness and bureaucracy for Wall Street.
The United Nations and Amnesty International are given complete regulatory jurisdiction of US markets.
The firms whose employees populate the trading floor itself are mandated to hire in strict accordance with the new minority and sexual orientation quota system. Goldman Sachs is fined 250k for their inability to find at least one Eskimo floor broker to hire.
Regulatory agents are permitted to arrest any “speculator” on the spot for windfall profits on successful trades.
Larry Kudlow throws himself from a rooftop, survives, and makes another attempt later that same day.
Hedge fund managers are forced to wear placards around their necks that detail their exact compensation for the prior year.
Shares of Defense Contractors are moved to the Pink Sheets.
Dividends and short-term capital gains are taxed at 90%, the money going to a Meteor Shower Victims Relief Fund, just in case the need for such a thing arises.
Commodity trading is outlawed as all resources are put into giant storage facilities for rationing amongst the population.
Within 2 weeks, the Dow drops to 4000, within one year, world peace breaks out and the need for trading/investing is rendered moot as we are all equal and best friends.