The Regulation Debate
Take a look at the May 11, 2012 Associate Press article entitled “Calls to toughen regulation follow JPMorgan loss.” [ http://news.yahoo.com/calls-toughen-regulation-jpmorgan-loss-212428437--finance.html ] I do not expect you to completely understand the article and that is part of my point. The banking industry has become so tremendously complex that it is difficult for people, including bankers, to understand it. In their pursuit of profits, banks use intricate financial instruments with exorbitant risks (such as derivatives and credit default swaps) and they use savvy legal techniques to disguise those risks. Most analysts put much of the blame for the economic decline of 2007-2009 (from which we have not yet fully recovered) on excessively risky lending practices by banks due in part to insufficient regulation of financial markets and the use of complex financial instruments that are not completely understood. Banks have spent vast sums of money lobbying politicians to reduce r