Saturday, May 1, 2010

Learning the Right Lessons

As I mentioned on Monday, I'm looking for some good stories related to derivatives that will help people understand the hubbub over them a little better.

Fareed Zakaria's column on Goldman Sachs is a good place to start.  As you've no doubt heard by now, Goldman has been sued civilly by the SEC and its executive were grilled by the Senate Permanent Subcommittee on Investigations in the past couple of weeks.

Zakaria demonstrates that one doesn't have to opposed derivatives regulation to understand the dangers, however, inherent when one firm is made a scapegoat for an industry:
the rage surrounding the Goldman case can cloud our perspective and distort public policy. We're going through a familiar part of America's boom-and-bust cycle. Having been mesmerized during the go-go years, having unduly lionized and feted industries, firms, and people as they rode the wave, we now want to throw these people to the wolves. We need to step back for a moment and try to understand what happened and learn the right lessons.
Whether new regulations are warranted is best left to a blog dedicated to studying financial issues, but making sure our processes and methods of oversight are calibrated to learning the right lessons is of vital importance to all fans of good government.

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