October 11, 2012

The SEC has flaws - like refusing to look at sub second trading data, for example. Or failing to understand the potential dangers of HFT, and the unlevel playing field it creates. The 2008 crisis, however, was primarily a product of major self-regulatory failures. As was the crash that prompted the ‘33 and ‘40 acts.

Before central banking and regulation, bank failure and currency collapse were regular events. The 19th century’s fragile post-Reconstruction economy provides many examples of Panics that cleaned out everyday people on a regular basis. Even in a gold-backed economy!

Modern economic libertarians are eager to point to the flaws in the system today, but that requires near-total ignorance of the past.



I would add to this that the flaws of the SEC are (usually) not a matter of incompetence by SEC personnel either.  I can tell you from a lawyer’s standpoint that the classic career trajectory for SEC regulators is to spend a few years as in-house counsel at the SEC, and then to transfer to the private sector, where large corporate entities pay people handsomely for their knowledge of the SEC’s regulatory scheme and procedural tools.  While this knowledge can be used to dodge corporate regulatory obligations, my experience has been that corporate officials just want people who can help their business stay in compliance so they don’t get nailed with a lawsuit by the shareholders for breach of fiduciary duty after the SEC drops a multi-million dollar fine on the company for something that could’ve been avoided by filing the proper paperwork.

  1. jaraconnell reblogged this from letterstomycountry
  2. mynameisntsir said: I don’t know any libertarians who denies the regular bank failures of the 20th century and 19th centuries. And it is indeed attributable to lack of regulation; fractional reserve banking-basically counterfeiting-should be illegal in the first place.
  3. wateringgoodseeds reblogged this from letterstomycountry
  4. letterstomycountry posted this