A brief comment on the past week’s developments in the area of financial reform. As investors, this matter to us, because every time the mad scientists on Wall Street blow up their lab – as they periodically do – our investment portfolios suffer collateral damage.
The long awaited US reform bill was finalized. There is plenty of news and commentary in print and on the web, so we won’t repeat any of it here. Suffice it to point out how the bank stocks reacted on Friday: Citi up over 4%, the broader bank index nearly 3%, the regional bank index nearly 2.5%.
Not receiving nearly as much notice in the US were the developments on the global financial scene with news leaking out of the draft of the Basel Committee proposal. The global financial index tacked on 2%. Judging from the market reaction, the banks appear to have been reasonably successful in bending policy in their favor. That is not necessarily bad; we need healthy financial institutions in order to have a dynamic economy…but have we attained what we set out to achieve by way of reform?