The Stupidity of "Regulating" Banks to Prevent Meltdowns

"The move took place mostly because of the overbureaucratization of the system as paper shufflers (who think work is mostly about paper shuffling) overburdened the banks with rules -- but somehow, in the thousands of pages of additional regulations, they avoided considering skin in the game." -- Nassim Taleb, Skin in the Game, p. 13

Comments

  1. Surprising how much skin in the game Bear Stearns, Lehman, even Citi had. That didn't work out so well.

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    1. Wow, what a COMPLETE misunderstanding of the concept! "Citi" can't have "skin in the game": it is a corporation, not a person. The point is the *people running things* didn't have skin in the game: Rubin kept all of his money.

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    2. So, in fact:
      1) There was MASSIVE amounts of regulation in place before the meltdown; and
      2) None of the key players had skin in the game.
      It is, in fact, well know around Wall St. that new regulations always present great opportunities to make riskless profits by gaming them. An 25-year Wall St. pro was just mentioning this to me the other day.

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