Most of the time when I meet with investors (large and small) and explain what I do and New Constructs does, they are astonished about what I explain as the reality of the investing world. They always ask: “What are regulators doing?”…”How can they allow these things to go on?”
The answers to that question are:
- Misplaced incentives – regulators, like everyone else, want to make lots of money. They achieve that goal by getting a job on Wall Street. This is documented in more detail in this post: “Where do regulators go to make money? Wall Street”. The point is that we cannot expect regulators to bite the hand that they hope will feed them Wall-Street-type bucks.
- Lack of skills – let’s face it, the best financial minds tend not to seek government jobs. Government work is low on the list of opportunities for financial wizards, to say the least. To get a glimpse into the productivity of the SEC, see this post: “SEC Porn Problem: Officials Surfing Sites During Financial Crisis, Report Finds”
- Lack of tools and information – regulators are far behind the curve when it comes to developing skills needed to keep up with the private sector. My meetings in DC revealed that regulators still do manually what the private sectors automated long ago. Without the proper tools, regulators are bringing a knife to the gunfight. Proof Is in Performance…