Recent Blog Posts
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The Times' Rorshach Geithner Story
Apr 27 20099:04am EDT -
Sinking Animal Spirits
Apr 27 20098:04am EDT -
Counter-cyclical Urban Policy
Apr 26 200910:04am EDT -
Be Your Own Counterfeiter
Apr 26 20099:04am EDT -
Being Tim Geithner
Apr 25 200912:04pm EDT -
Notes From a Press Conference Naif
Apr 25 20099:04am EDT -
What Good is the News?
Apr 25 20098:04am EDT -
Stressful Enough
Apr 24 20092:04pm EDT -
Not Regretting the Pound
Apr 24 20091:04pm EDT -
Introducing the New Ford Squeeze
Apr 24 20099:04am EDT -
Non-Economic Questions of the Day
Apr 24 20099:04am EDT -
The Stress Test Blind Alley
Apr 24 20098:04am EDT -
Happy Hour
Apr 23 20099:04pm EDT -
Recovery Without Rebalancing
Apr 23 20096:04pm EDT -
The Shape of Your Recession
Apr 23 20095:04pm EDT
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How Important is it to Jail Insider Traders?
An interesting discussion about regulators with teeth cropped up during John Gapper's panel on financial centers. Gapper noted that the SEC was much better at jailing white-collar criminals than any of London's financial regulators, to which Guy Saxton, the CEO First London Securities, essentially said so much the better for London.
Saxton's argument was that jailing criminals doesn't achieve very much in terms of changing future behavior. In the London system, he said, where brokers can be effectively ostracized and wiped out by the rest of the market if they violate the written and unwritten principles, has a much more salutary effect on the market as a whole.
The other side of the argument came from Magnus Böcker, the president of Nasdaq OMX Group, who said that having regulators with real teeth does increase investors' trust and faith in the markets.
My feeling is that when it comes to financial markets, it's unrealistic to hope that criminal behavior will be punished by the local civil prosecutors rather than specialized regulators. I also feel that in a world where the vast majority of insider trades go unprosecuted (just look at the behavior of credit default swaps ahead of big M&A deals), the real fear of going to jail if you're found out is one of the few things that can meaningfully decrease such activity.
