Saturday, March 7, 2009

Stock Market Crash and Regulations

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Will pumping money in the economy help the economy to recover? Sorry, so far, we were not pumping money in the economy we were feeding the Wall Street. We are told that we have to take a look at the source of the problem and then eliminate it and only after that start treatment. Last year we took a look at the source of the problem and what was done? We have found that the main reason of the stock market crash is unregulated market, unregulated trading, unregulated Wall Street. We are told that the main reason is bad mortgages, however, who generated these bad mortgages??? Nobody even talks about that, in opposite we continue to feed unregulated animals. Why??? Will it help to recover??? We bail out a lot of public companies, and they continue asking for more money. Did nobody get it?

It could be weird that a trader is asking about more regulation on the market. We always were threatened that regulations mean end of the freedom. Wrong!!! Freedom starts with regulation and rules. We have police on the street, we have driving rules, we have judges and courts, we have criminal and civil laws - does it mean we are not free??? FREEDOM NEEDS TO BE PROTECTED. That is why we have all of this. The same is in the stock market. Free trading, free stock market has to be protected. When I mention about rules and regulation on the stock market I mean rules and regulations that protect economy from bubbles and crashes, rules and regulations that protects the investments from the stock market games.

After the Stock Market Crash in 1929 the following regulation were implemented:
  1. The Securities and Exchange Commission (SEC) was established;
  2.  The Glass-Stegall Act was passed to separated commercial and investment banking activities.
  3.  In 1933, the Federal Deposit Insurance Corporation (FDIC) was established to insure individual bank accounts for up to $100,000.

In 1987 after the stock market crashed, again we saw new regulation intendment to protect investors:

  1.  Uniform Margin Requirements;
  2.  Circuit Breakers. The New York Stock Exchange and the Chicago Mercantile Exchange instituted a circuit breaker mechanism, which halts trading on both exchanges for one hour should the Dow fall more than 250 points in a day, and for two hours, should it fall more than 400 points.

After Stock Market Crashed in 2000 new rules for day traders were introduced. Apparently previous Government was not able to do more.

We have recent stock market crash, NOTHING DONE. Haven't we learned anything from the recent crash?

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