Monday, June 28, 2010

Regulation Blues

I am showing this image again because the Daniel Roth article supporting it continues to amaze me as to just how sound an approach it is in achieving true financial reform in the US while Obama & Company foist upon us another ineffective regulatory agency intended to keep Wall Street in check but can't while forcing us to spend money we don't have on an entity we don't need.

"This is a cycle that goes on and on—and will continue to get repeated," says Peter Wysocki, a professor at the MIT Sloan School of Management. "You can't just make new regulations about the next innovation in financial misreporting."

That's why it's not enough to simply give the SEC—or any of its sister regulators—more authority; we need to rethink our entire philosophy of regulation. Instead of assigning oversight responsibility to a finite group of bureaucrats, we should enable every investor to act as a citizen-regulator. We should tap into the massive parallel processing power of people around the world by giving everyone the tools to track, analyze, and publicize financial machinations. The result would be a wave of decentralized innovation that can keep pace with Wall Street and allow the market to regulate itself—naturally punishing companies and investments that don't measure up—more efficiently than the regulators ever could.

The revolution will be powered by data, which should be unshackled from the pages of regulatory filings and made more flexible and useful. We must require public companies and all financial firms to report more granular data online—and in real time, not just quarterly—uniformly tagged and exportable into any spreadsheet, database, widget, or Web page. The era of sunlight has to give way to the era of pixelization; only when we give everyone the tools to see each point of data will the picture become clear. Just as epidemiologists crunch massive data sets to predict disease outbreaks, so will investors parse the trove of publicly available financial information to foresee the next economic disasters and opportunities.

The time to act is now... but we won't - ed

As a techie, I know first hand just how powerful transparency is. Open source Software is one example and Peer for Patent is another and we haven't even discussed the sunshine law (even with all of it's shortcomings) or open source treasures like PLOS. The other interesting fact is that transparency doesn't have to cost very much because XBRL, the mechanism for financial metadata works and is in place, just ask IBM, Apple and Microsoft to see why.

Question: Why wasn't Glass-Stegall reinstated? 
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