Why Good Regulations Make for Good Banking – In My Humble Opinion

Just like the next financial disaster 

No One Asked Me – I Just Hope Some Wise Person Will See Something Here

Once upon a time there was really terrific banking system that got screwed up. By relaxing high standards and deregulation, banks were allowed to do stupid things that led to the banking scandals and the infamous mortgage catastrophes… It can happen again.

In 1980, a Swiss banker, the president of a leading bank in the United States told me that the relaxation of regulations was so bad that he could be soon be selling “socks and stocks” in the same branch office. He thought that savings and loans were the bread-and-butter of banking. He said he knew how to produce expected results for customers, superiors and the banking industry. He also said, “Now we will have a lot of trouble throughout the United States of America”.

He did not want to do anything else but savings and loans. Deregulation was leading him into such areas as trading in bonds, stocks and securities of all kinds. There was also the smell, the bad smell, of selling off its bad risk mortgages. Does that sound familiar because not too far afterwards didn’t we find that American banking was at risk and needed to be bailed out? Why? The answer is deregulation. In addition, countless numbers of mortgagees were at risk of losing everything. Around 1980, bank executives then decided they could make massive amounts of money by considering their financial services to be called “Products”. Simultaneously the real product industries were underperforming and uncompetitive with China. But the beat went on and more and more top banking and hedge fund and venture capital and derivatives were introduced with the goal of making money for the wealthy financial wizards. Why? The answer is the same… deregulation.

Prior to 1980, banks were able to produce between 5 and 8% interest on savings accounts. Some of us remember those days. The reason that there is virtually .021% interest on savings and money market accounts, is precisely because of this deregulation era that has stimulated greed and personal aggrandizement. With proper regulation, America can return to the era of earning money through savings and loan banks.

Solutions – Maybe Too Idealistic?

The lesson here is that good regulations make for good banking and that is in the common interest of all people. On the other hand, deregulation opens the door to bad financial practices that can be disasters yet again to the majority of people in our great country.

Do not casually deregulate as a rule. It is ridiculous and likely to destroy us because the wizards have been perverting financial markets. They have been opening the door to foreign banks coming into this country. Under the Citizens United law, the entry of Chinese corporations and their acquisitions of American companies Chinese banks and others will be welcomed with open arms by people who have no commitment to America and Americans. Stop it. How? Answer is regulation…. Not deregulation. Regulate all but savings and loan and community banking, as long as they do nothing else. Regulate the investment banks and hedge funds, trading in securities, precious minerals and selling of bad-risk mortgages. Or is that too late?

This author tries again

Lazar Achievement Psychology
About Richard G. Lazar, PhD

Quirky, confident and a bit whimsical. Tough and warm. Not old, just mature and ripe . . . even in retirement.