Jack Goldstone is delusional

In response to JP Morgan's announcement that it lost $2B recently.

Let’s not fool ourselves that any rules will be a perfect solution — traders will always be looking for new instruments and methods to increase their profits.  But at least we should start with the presumption that certain rules for the safety of bankers and their clients are in everyone’s interests, and we need to find sensible bargains on rules.  Without that presumption — if the starting point is that no rules at all are best — we will swing from one extreme to the other, from inadequate regulation that leads to crises to over-reactions that burden companies with too much regulation and red tape.

We are in that over-reaction phase now, with Sarbanes-Oxley (in reaction to Enron’s fraud and collapse) and the Volker rule (in reaction to the Lehman collapse) burdening or threatening corporate action.  Yet the reaction of the business community has been to push all the way back to the “no regulation is best” and decry “job-killing regulations.”   Actually, it is the absence of regulation that is job-killing in the same manner that running an Indy 500 with no rules or caution flags, or a championship football match with no referees, would lead to efforts to win that result in people being killed – or in financial markets, in major companies going bust.

Because obviously all the years S-O has been in place have been a time of excessive financial conservatism. Oh, wait, no.

But here's the thing, if it really was better for "bankers and their clients" that there be clear guidelines on financial, why aren't either the former or the latter (including institutional investors and major corporations who don't lack the resources to influence law- and rule-making) pushing for them? The contemporary finance industry isn't an alien colony: it has grown into its current form in the political-economic environment of the past few decades, and so it is probably a best initial hypothesis that it is in some way adapted to that environment. If that form is crisis-prone, it shouldn't be taken for granted that this is not a necessary condition of its adaptation.