Who has the most credibility on re-regulating the financial system? IMO, Indiana consultant

[ProgressiveEconomist]

Leonard D. Boles. IMO, it's not even close. Boles alone warned the SEC against a crucial 2004 leverage rule change that has led to the demise of Bear Stearns, Merrill Lynch, and Lehman. If the SEC had listened to him, IMO the financial world would not be in today's perilous condition.

WHAT'S YOUR OPINION?

From http://www.nytimes.com/2008/10/03/business/03sec.html?_r=2&th=&oref=slogin&emc=th&pagewanted=print

"In letters to the commissioners, senior executives at the five investment banks complained about what they called unnecessary regulation and oversight by both American and European authorities. A lone voice of dissent in the 2004 proceeding came from a software consultant from Valparaiso, Ind., who said the computer models run by the firms--which the regulators would be relying on--could not anticipate moments of severe market turbulence.

'With the stroke of a pen, capital requirements are removed' the consultant, Leonard D. Bole, wrote to the commission on Jan. 22, 2004. 'Has the trading environment changed sufficiently since 1997, when the current requirements were enacted, that the commission is confident that current requirements in examples such as these can be disregarded?'

He said that similar computer standards had failed to protect Long-Term Capital Management, the hedge fund that collapsed in 1998, and could not protect companies from the market plunge of October 1987. Mr. Bole, who earned a master's degree in business administration at the University of Chicago, helps write computer programs that financial institutions use to meet capital requirements. He said in a recent interview that he was never called by anyone from the commission.

'I'm a little guy in the land of giants,' he said. 'I thought that the reduction in capital was rather dramatic.'"

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Boles's actual January 2004 warning letter to the SEc is online at http://www.sec.gov/rules/proposed/s72103/s72103-9.pdf .

All the correspondence the SEC received on the proposed rule, including Boles's, is linked at http://www.sec.gov/rules/proposed/s72103.shtml . Most came from huge financial firms, many of whom can trace most of their current troubles to what the SEC rule change let them do.