Above my pay grade but I'm hoping you or some among your readership can get these considerations in front of the right people at @DOGE and elsewhere in the new Administration. Thanks for walking the rest of us through some of these twists and tangles.
In view of the Andreessen interview on Joe Rogan, we must take a hard look at debanking and regulatory pressure. Prior to the financial crisis of 2008, we formed about 150 new banks and lost about 300 existing banks per year. Since then, we have formed a bare handful; the regulatory barrier is too high for new bank formation. Andreessen said that crypto and fintech founders have been debanked, had their companies debanked, been prosecuted, or received Wells notices to deter commerce. Prosecuting illegal behavior is valid, the rest not so much. AI founders were told "don't even bother trying to launch more startups, because we're only going to allow 2 or 3 heavily regulated AI players." It's a sobering example of overreach and undue pressure.
That interview was one of the most shocking and distressing interviews I’ve heard in years. And the utter silence that has followed is actually staggering.
Amen to all of this good sir. I have been yelling from the rooftops going back to my days working in the NYC financial world after college. I quickly realized just how damaging and distorting our regulations are. TBTF my ass. We have had a nearly 100 year hangover from Glass-Steggal, which was one of the biggest pieces of socialist crap to ever grace the halls of congress and then to be allowed to take hold by the supreme court. This was the birth of our modern regulatory state, and the start of the permenant codification of all large businesses, encschoning them into the market caps they currently have/are with little concern regarding any up and coming company. Competition, what is that? Basel 1, 2, 3 and whatever incarnation we are up to now; Dodd-Frank, the SEC, OCC, FDIC, SARB-OX, etc. Funny thing is not one of these things has shown the ability to stop bad things from happening, largely because all of these things tend to shove financial companies into a tight window that they all try to squeeze through at one time eventually creating a bubble. We could really become something if we could unwind all of this unecessary, destructrive oversight and regulation. Oh, one more thing- companies need to be allowed to fail when they make foolish decisions. It is okay if little Johnny Chip Maker fails.
It doesn't have to be though. After 70 years of our march towards this endpoint, it would be wild to see companies have to actually compete, especially the dominant large CAP's.
The manner in which securities, securities trading, exchanges, financial services, and regulation have evolved over the last century has, in fact, built a patch work quilt of regulation and regulatory fiefdoms within the agencies and in the Congress. It is illogical, duplicative, contradictory, and inefficient.
As you wisely note, all of this could be dramatically streamlined resulting in more efficient, predictable regulation and a huge cost savings by collapsing the competing fiefdoms.
That much is obvious and any decent MBA could figure out how to make it happen.
The big problem is that none of the regulators are actually helpful when innovation is involved. If you go to the SEC and say, "I am thinking about doing this." They will nod and say, "Bully. Good for you." They are not helpful. I ran a public company, so I know this to be true.
I do believe this dampens innovation -- not to the extent that the innovation racket says, but still materially.
The other big problem is the regulators cannot understand scale. They want to regulate Jamie Dimon and a country banker the exact same. Thus, the death of community banking and the piling on of SOx.
As to crypto, let's be honest, it's first attraction was its faceless anonymity that played into the hands of a myriad of evil, bad persons. This is incontrovertible and the regulators were on the moral high ground at that instant.
There are some who will say that innovation initially -- INITIALLY - breeds malfeasors. I believe that to be true.
The problem is that the system was designed for evil doers whether by intent or accident.
Politics has become so pervasive that it has crept into the regulatory environment. Gary Gensler was Hillary Clinton's campaign CFO FFS.
I don't think Donald J Trump is going to invest any of his meager sinecure of political capital in redesigning the financial regulatory world. He will cut lots of regulations, but he won't do the heavy lifting of streamling the entire Jabba the Hutt beast.
I agree with you more than you agree with yourself. Especially the last paragraph. Trump isn't a dummy. He will try and integrate crypto into the current system, streamlining rather than redoing it. Too many turf wars to solve with no tangible benefit whereas redoing the FBI/CIA/DOJ has a lot of benefits. Redoing HHS has a lot of tangible benefits. Redoing immigration has a lot of tangible benefits. Redoing the tax code has lots of tangible benefits. Redoing Education and the Dept of Interior has lots of tangible benefits. Making Dept of Defense better has lots of tangible benefits.
The benefits are identifiable to the average US citizen, and they feel them in their daily lives. Redoing security/futures/crypto/financial regulation does not since it's all backstage stuff.
May I request a good and sound discussion of Crypto? I've read the basics but admit that I retain fundamental skepticism given the many issues that surround it as an investment option.
Managing against the risk...for example, protecting the bitcoin investment given the lack of fully secure methods to "store" the investment (no DTC for bitcoin as I understand it.
And, the merits of bitcoin "mining" which seems to me to be just a drag on the grid. The argument that bitcoin is created from "excess" server capacity (if I understand that correctly) does not seem to me to be validated in real life.
Seems to me that with AI and other developments we already have a massive issue with our electrical grid, compounded by lack of investment in bullet-proofing the grid and building out capacity. The latter obviously affected by the green energy bromides.
Bitnomial.com will manage your price risk on Bitcoin. Storage risk: put it on a drive and then put that drive in a safe (cold storage they call that). I don't know about the grid issues with regard to mining, AI etc. Jimmy Odom runs a Bitcoin mining farm and could better answer if he sees this. The real problem with the grid is we have tried to expand it using stupid do nothing energy....solar/wind instead of building new power plants-especially nuclear. Quantum computing also takes boat loads of energy and so do EVs.
In my professional life I"ve seen the downside (and huge cost, btw) of SarBox, which rarely, in my experience, prods companies to operate better or more ethically.
Likewise the spaghetti of banking regulations (and overlapping regulatory agencies such as OCC, Fed, and various State Banking Agencies, among others) should be examined. Credit is basically non existent for small companies leaving all the opportunity for private funding orgs such as angel networks, VCs and other private equity funds.
However, the realist in me suspects that real regulatory overhaul won't happen until we get the Federal financial house in order.
Also, you know my opinion on Gary Gensler and how much I have railed against him publicly. It is my fervent hope, wish and prayer that one day he ends up behind bars.
Great article. Jack, despite many accolades over the years, may still go down in history as one of the most underrated, yet brightest, minds in the industry, not just Futures, but financial industry, period.
The way to do this is through social media and getting people we know to present this to Musk and Ramaswamy and let them sell it to Trump.
The overall efficiency improvements, reduction of bloated bureaucracies, elimination of egomaniacal personalities in so many alphabet agencies, and most important of all, streamlining to make America the premiere cryptonation on the planet when we are nowhere near that is damn appealing.
I can see the benefits of a streamlined financial regulation structure in the government. However, the thought of a Gary Gensler type running it with Liz Warren cheering from the sidelines promptly gave me nightmares. The regulatory mission needs an overhaul by Congress before any agency consolidation. They could start by rolling back all of the 21st century stuff they passed.
Above my pay grade but I'm hoping you or some among your readership can get these considerations in front of the right people at @DOGE and elsewhere in the new Administration. Thanks for walking the rest of us through some of these twists and tangles.
In view of the Andreessen interview on Joe Rogan, we must take a hard look at debanking and regulatory pressure. Prior to the financial crisis of 2008, we formed about 150 new banks and lost about 300 existing banks per year. Since then, we have formed a bare handful; the regulatory barrier is too high for new bank formation. Andreessen said that crypto and fintech founders have been debanked, had their companies debanked, been prosecuted, or received Wells notices to deter commerce. Prosecuting illegal behavior is valid, the rest not so much. AI founders were told "don't even bother trying to launch more startups, because we're only going to allow 2 or 3 heavily regulated AI players." It's a sobering example of overreach and undue pressure.
That interview was one of the most shocking and distressing interviews I’ve heard in years. And the utter silence that has followed is actually staggering.
Amen to all of this good sir. I have been yelling from the rooftops going back to my days working in the NYC financial world after college. I quickly realized just how damaging and distorting our regulations are. TBTF my ass. We have had a nearly 100 year hangover from Glass-Steggal, which was one of the biggest pieces of socialist crap to ever grace the halls of congress and then to be allowed to take hold by the supreme court. This was the birth of our modern regulatory state, and the start of the permenant codification of all large businesses, encschoning them into the market caps they currently have/are with little concern regarding any up and coming company. Competition, what is that? Basel 1, 2, 3 and whatever incarnation we are up to now; Dodd-Frank, the SEC, OCC, FDIC, SARB-OX, etc. Funny thing is not one of these things has shown the ability to stop bad things from happening, largely because all of these things tend to shove financial companies into a tight window that they all try to squeeze through at one time eventually creating a bubble. We could really become something if we could unwind all of this unecessary, destructrive oversight and regulation. Oh, one more thing- companies need to be allowed to fail when they make foolish decisions. It is okay if little Johnny Chip Maker fails.
Great call on Glass-Steagall and its after effects. Agree, a part of capitalism is failure.
It doesn't have to be though. After 70 years of our march towards this endpoint, it would be wild to see companies have to actually compete, especially the dominant large CAP's.
The manner in which securities, securities trading, exchanges, financial services, and regulation have evolved over the last century has, in fact, built a patch work quilt of regulation and regulatory fiefdoms within the agencies and in the Congress. It is illogical, duplicative, contradictory, and inefficient.
As you wisely note, all of this could be dramatically streamlined resulting in more efficient, predictable regulation and a huge cost savings by collapsing the competing fiefdoms.
That much is obvious and any decent MBA could figure out how to make it happen.
The big problem is that none of the regulators are actually helpful when innovation is involved. If you go to the SEC and say, "I am thinking about doing this." They will nod and say, "Bully. Good for you." They are not helpful. I ran a public company, so I know this to be true.
I do believe this dampens innovation -- not to the extent that the innovation racket says, but still materially.
The other big problem is the regulators cannot understand scale. They want to regulate Jamie Dimon and a country banker the exact same. Thus, the death of community banking and the piling on of SOx.
As to crypto, let's be honest, it's first attraction was its faceless anonymity that played into the hands of a myriad of evil, bad persons. This is incontrovertible and the regulators were on the moral high ground at that instant.
There are some who will say that innovation initially -- INITIALLY - breeds malfeasors. I believe that to be true.
The problem is that the system was designed for evil doers whether by intent or accident.
Politics has become so pervasive that it has crept into the regulatory environment. Gary Gensler was Hillary Clinton's campaign CFO FFS.
I don't think Donald J Trump is going to invest any of his meager sinecure of political capital in redesigning the financial regulatory world. He will cut lots of regulations, but he won't do the heavy lifting of streamling the entire Jabba the Hutt beast.
JLM
www.themusingsofthebigredcar.com
I agree with you more than you agree with yourself. Especially the last paragraph. Trump isn't a dummy. He will try and integrate crypto into the current system, streamlining rather than redoing it. Too many turf wars to solve with no tangible benefit whereas redoing the FBI/CIA/DOJ has a lot of benefits. Redoing HHS has a lot of tangible benefits. Redoing immigration has a lot of tangible benefits. Redoing the tax code has lots of tangible benefits. Redoing Education and the Dept of Interior has lots of tangible benefits. Making Dept of Defense better has lots of tangible benefits.
The benefits are identifiable to the average US citizen, and they feel them in their daily lives. Redoing security/futures/crypto/financial regulation does not since it's all backstage stuff.
May I request a good and sound discussion of Crypto? I've read the basics but admit that I retain fundamental skepticism given the many issues that surround it as an investment option.
What would you like to learn?
Managing against the risk...for example, protecting the bitcoin investment given the lack of fully secure methods to "store" the investment (no DTC for bitcoin as I understand it.
And, the merits of bitcoin "mining" which seems to me to be just a drag on the grid. The argument that bitcoin is created from "excess" server capacity (if I understand that correctly) does not seem to me to be validated in real life.
Seems to me that with AI and other developments we already have a massive issue with our electrical grid, compounded by lack of investment in bullet-proofing the grid and building out capacity. The latter obviously affected by the green energy bromides.
Again, correct me if I"m wrong...
Bitnomial.com will manage your price risk on Bitcoin. Storage risk: put it on a drive and then put that drive in a safe (cold storage they call that). I don't know about the grid issues with regard to mining, AI etc. Jimmy Odom runs a Bitcoin mining farm and could better answer if he sees this. The real problem with the grid is we have tried to expand it using stupid do nothing energy....solar/wind instead of building new power plants-especially nuclear. Quantum computing also takes boat loads of energy and so do EVs.
Provocative ideas, Mr. Carter.
In my professional life I"ve seen the downside (and huge cost, btw) of SarBox, which rarely, in my experience, prods companies to operate better or more ethically.
Likewise the spaghetti of banking regulations (and overlapping regulatory agencies such as OCC, Fed, and various State Banking Agencies, among others) should be examined. Credit is basically non existent for small companies leaving all the opportunity for private funding orgs such as angel networks, VCs and other private equity funds.
However, the realist in me suspects that real regulatory overhaul won't happen until we get the Federal financial house in order.
Also, you know my opinion on Gary Gensler and how much I have railed against him publicly. It is my fervent hope, wish and prayer that one day he ends up behind bars.
Great article. Jack, despite many accolades over the years, may still go down in history as one of the most underrated, yet brightest, minds in the industry, not just Futures, but financial industry, period.
The way to do this is through social media and getting people we know to present this to Musk and Ramaswamy and let them sell it to Trump.
The overall efficiency improvements, reduction of bloated bureaucracies, elimination of egomaniacal personalities in so many alphabet agencies, and most important of all, streamlining to make America the premiere cryptonation on the planet when we are nowhere near that is damn appealing.
May I share your article with some people?
Yes. Please share all you want
I can see the benefits of a streamlined financial regulation structure in the government. However, the thought of a Gary Gensler type running it with Liz Warren cheering from the sidelines promptly gave me nightmares. The regulatory mission needs an overhaul by Congress before any agency consolidation. They could start by rolling back all of the 21st century stuff they passed.