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[Editor’s Note: This is the third installment of a three-part examination of deregulation, and how it helped spawn the U.S. credit crisis. In this capstone installment, Gilani outlines a plan for rebuilding the nation’s regulatory safety net.]
Dear Mr. President-Elect:
The people of the United States have spoken. Their collective voice resonates loudly and overwhelmingly in praise of your vision and promises for America the beautiful.
Over the many voices, the chorus of a common refrain resounds: There is nothing we as a people cannot do if inspired by confidence in our president, honest and transparent democratic government, and equal opportunity in pursuit of our happiness.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.
One thing most seem to forget is the spiritual side of things as if irrelevant. America has turned its back chosing mammon over God. We did this when we turned in highly favorable ratings of former President Clinton after his infidelity/lie. America was more concerned about their wealth than about integrity…thus moral decay had taken hold. We hit a recession a few years later when our World Trade Center was hit (was this judgment?).
Did America turn to God? No we turned to ourselves and sought to resurrect our economy out of the recession through lowering the lending rates. This move led to countless housing purchases and we thought we had solved our problem. We did not and this has imploded into the problem we are now facing. America thumbed its nose at God as we not only did not turn to Him but we sought justification and legalization of things perverse.
America needs a spiritual awakening if we are to get in the good graces of God. We have turned Thanksgiving into a time of gluttony and football instead of being thankful to the God that has blessed our nation beyond all others.
World Trade Center represented mammon, and mammon is what drives the American economy. We want and want and then we blame others when things go wrong.
We do need to pray for President Obama but our trust should be in God.
Dear Mr. Gilani
I appreciate your efforts to contribute to the recovery of our gravely wounded nation. I hope you send your ideas directly to the President-elect. I’d like to believe he’d appreciate them.
Don’t be deterred by people who toss meaningless epithets like “Marxist/Socialist” at ideas they don’t agree with. The only raison d’etre for governments is to govern and regulate. The best and fairest governments strike a delicate balance between too much and too little regulation. Your ideas are obviously designed to achieve that balance.
We saw what happens when a government doesn’t regulate at all. The wolves came out and had a feast in the marketplace. There’s nothing “free” about that kind of market.
This is an excellent, thoughtful, and in my opinion absolutely correct letter to our president.
Thank you for expressing your thoughts, which many of us share.
Well said.
[…] R. Shah Gilani Money Morning addthis_pub = 'jutiagroup'; addthis_logo = 'http://www.jutiagroup.com/favicon.ico'; addthis_brand […]
This is the most Maxist/Socialistic idea that I have heard from any of my newletters that I have "ever" subscribed too. What's he doing writing for you. Although I find your commentaries very interesting and sometimes enlightening, having Mr Gilani as one of your writers will now make me skeptical of any economic analysis you put forth. I find it difficult to believe that the Oxford Club or any of its advisors would have any affilation with someone who espouses this type of anti-free market philosophy.
Shah, thank you for your thought provoking article. If we are lucky people with the ability to do something about our situation will read it.
One item I did not see has to do with Insurance. I seems to me that investors believed that AIG was 'insuring' the various morgage backed securities, but in fact were not placing any where near an appropriate amount in reserves. Where is the insurance industry in all this?
John
Great!! Let's be involved thoroughly and deeply.
[…] January 19, 2009 · No Comments From Money Morning […]
De-regulation has nothing to do with the U.S. financial crisis.
The CRISIS is simply the ‘predicted’ outcome of a central bank (the fed) controlling a fractional reserve system.
It is without doubt the greatest Ponzi scheme of all time.
Basically the private bankers create money from nothing, loan it out, and collect interest in perpetuity, (power granted to them by the Federal Reserve Act of 1913).
Don’t be a fool and believe that the Federal Reserve is actually Federal or that it has any Reserves!
The crisis will continue in divergent up and down cycles until we reach the point of hyper-inflation and a total disintegration of the dollar. This has happened to other countries in the past, it is doomed to happen to the U.S.
Of course this could all be stopped by right now by replacing the federal reserve notes (dollars) with with real money (money that is backed by gold). Followed up with the U.S. Congress repealing the Federal Reserve act of 1913.
Most people are not even aware that the Federal Reserve is privately owned!
These owners collect most of the interest off the U.S. national debt, which is currently $1 billion dollars a day!
The interest is paid to the Rockafeller’s, the Morgan’s, the Bank of Spain, the Bank of Israel, the Rothchild’s, the Kennedy’s, the Getty’s, etc…. It’s no wonder they stay wealthy for generations!)
Get active! Learn and understand the real problem:
–> The Federal Reserve &
–> Fractional Reserve Banking.
Sounds like more of the same to me. Over regulation and government interference got us into this mess. Why would more of the same change anything? And who is smart enough to believe he or she can solve the worlds financial problems. Such a person should scare most thinking people. It sure does me.
FOFL
You said "With the mandate of the people you (meaning the Messiah – Barrack Hussain Obama) have an opportunity to override the self interest of entrenched politicians, the inordinate influence of lobbyists and the disturbing greed of vested interests. The old walls of crony capitalism are held together by self-serving, self-policing and self-destructive regulatory bodies."
Never happen, he is one of them.
As to your plan, it is just rearranging deck chairs on the Titanic.
Thanks for the comic relief!
[…] this week published an open letter to President-elect Obama in which the credit-crisis expert detailed a plan for overhauling the U.S. regulatory structure […]
Interesting ideas, but is more bureaucracy really the answer?
There is nothing new under the sun:
"When Diocletian came to the throne in 284, he found three great problems before him… The third and hardest was mainly economic – to restore the dwindled agriculture, commerce, and population of the Empire. On this Diocletian and Constantine went wrong together. They not only failed to cure the evil, but greatly increased it. Not much was gained by remitting taxes that could not be paid, and settling barbarian colonists and barbarian serfs in the wasted provinces. Serious economic difficulties have moral causes, and there was no radical cure short of a complete change in the temper of society. Yet much might have been done by a permanent reduction of taxation and a reform of its incidence and of the methods of collection. Instead of this, the machinery of government (and its expense) was greatly increased. The army had to be held in check by courts of Oriental splendour and a vast establishment of corrupt officials. We can see the growth of officialism even in the language, if we compare the Latin words in Athanasius with those in the New Testament. So heavier taxes had to be levied from a smaller and poorer population. Taxation under the Empire had never been light ; in the third century it grew heavy, under Diocletian it was crushing, and in the later years of Constantine the burden was further increased by the enormous expenditure which built up the new capital like the city in a fairy tale. We are within sight of the time when the whole policy of the government was dictated by dire financial need."
– The Cambridge Medieval History, Vol. I p. 20 (1911)
I can not imagine the vitriol that this writing has evoked, but the vitriol is self demeaning, thus future comments from those individuals are only worthy in the process of developing a list of those who should be ignored.
It was 9/11. I can tell everyone I've never witnessed anything more disgusting. I remember that sentiment well, and reckoned I'll never have the chance to revisit it in my lifetime… at least, not in a very long time.
Apparently, I was wrong… Merely 7 short years! And the fact that something as shameless as this so-called 'crisis,' can spout from the 'mecca of world-class management' — rather than some corrupt third-world syndicate — makes it all the more appalling.
One can argue that the crimes of 9/11 was connoted by morbid ideology. But such 'Economic Crimes Against Humanity,' as these 'elites of the civilized world' brought forth, can only be attributed to quintessential — and abysmal — Greed And Self-aggrandizement. To them, morality may not even have a place in their toilets, unless it got stuck in there somehow!
Yet, unlike 9/11, nobody in a position to call the shots had, so far, uttered one decent word about giving these 'elites' what they truly deserve.
Could it be because this thing reaches all the way to the very top — to those deemed untouchable, and too numerous to contend with?
This still-unfolding mess is huge, to be sure. As for the enormity of connivance… Readers, judge for yourselves. Personally, I'd say — What Chamberlain, Gamelin, Hitler, Himmler, and Stalin were to political history, these 'elites' should be to financial history.
Perhaps 'Devils-in-Disguise' are Real, and from this point onwards, the phrase 'Crisis of Confidence' should be reappraised in a 'new-and-improved' context.
Sad… Chilly too!
Regulations have their place, just don't forget: Rules Are Made To Be Broken.
The crux of the matter: Moral Fibre!
… How do you regulate that?
What a load of Bullshit. Greed will once again reign once everything gets better. History will show this time and time again. So much for so called transparancy. You will never get it. Remember the President of the USA is only a puppet, nothing more nothing less!!
[…] To view original article go to An Open Letter to President-Elect Barack Obama: How a Regulatory Makeover Can Fix the Financial Cris… […]
Dear Shah,
Your open letter to (now) President Obama shows a great deal of insight and deliberation. Please accept my congratulations on a job well done.
Although I have considerable confidence in the President's intellectual capacity, (what a refreshing thought), your suggestions should help him in establishing a new regulatory system that will serve our country well. At the core of our current problems lie what you accurately describe as "the self interest of entrenched politicians, the inordinate influence of lobbyists and the disturbing greed of vested interests." If we cannot overcome these obstacles, all other efforts will be for naught.
Best wishes,
John
[…] approval, but ultimately, the plan’s focus on job creation, infrastructure development, increased regulatory oversight, tax relief for businesses and America’s middle class, and aid to states struggling with […]
EVERY THIRDWORLD COUNTRY THAT BEGIN TO PROSPER DEREGULATED TAKING AWAY WHATEVER HINDERED SMALL BUSINESSES FROM GROWTH. EVERY ONE AGREES SMALL BUSINESSES IS THE WHEELS OF COMMERCE. IF THE GOVERNMENT WOULD BYPASS ALL THE BUNGLERS, THAT IN ORDER TO PRODUCE, YOU NEED TO GET PERMISSION FROM MEN WHO PRODUCE NOTHING-WHEN MONEY FLOWES THROUGH THOSE WHO DEAL, NOT IN GOODS, BUT IN FAVORS-THOSE WHO GET RICH BY GRAFT AND PULL NOT HARD WORK.CONGRESS HAS PASED LAWS TO PROTECT THEM AGAINST YOU NOT YOU AGAINST THEM. WE NOW SEE CORRUPTION BEING REWARDED NOT HONEST AND SELF-SACRIFICE-AS I SEE IT WE NEED ONE MORE ARM OF GOV. GO TO SMALL BUSINESSES GIVE THEM WHAT THAY NEED TO GROW, DETAX, DEREGULATE, GIVE THEM TAX FREE STATIS FOR ONE YEAR, GIVE THERE EMPLOYES TAX FREE STATIS FOR ONE YEAR, IF THE MONEY THAT HAS ALREADY BEEN THROWED AWAY WOULD HAVE BEEN USED IN THIS WAY HEADLINES WOULD READ EMPLOYMENT TURNING AROUND. IF THAY FILL THE HOG TROUGH UP AGAIN IT WILL DISAPPEAR JUST LIKE THE FIRST BILLIONS DID. IF THAY DO YOU MAY KNOW BLACK WINTER IS UPON US GOD HELP US.
[…] approval, but ultimately, the plan's focus on job creation, infrastructure development, increased regulatory oversight, tax relief for businesses and America's middle class, and aid to states struggling with […]
[…] approval, but ultimately, the plan's focus on job creation, infrastructure development, increased regulatory oversight, tax relief for businesses and America's middle class, and aid to states struggling with […]
[…] statements echoed the sentiments of our own Shah Gilani, who provided guidelines on how to implement effective regulatory reform in Monday's edition of Money […]
Some regulation would help but it is not the solution. The real problem is a Government engineered and subsidized Positive Feedback Ponzi Scheme. Every time there was corrective Negative Feedback, Bush and our so called leadership made changes to keep the party going.
A more certain plan would be an Immigration Moratorium or reduction to about 100K people a year until we are back to at least normal employment, have a path to energy independence, and ideally have a national population plan in place to understand what the constraints actually are in terms of energy, ecology, and the economy.
Right now the wages of low end workers are stagnant and have been for some years due to the massive illegal and legal immigration we have received. If we stop creating Upton Sinclair's "The Jungle" on a national scale and make a firm and declared policy of taking care of our own citizens as our first priority, CONFIDENCE in the future would skyrocket, wage earners at the lower end would see their wages rise (or at the very least see improved job prospects). That would stop the increase in foreclosures and stabilize the housing market, thus freeing the economy. Tax receipts would be up while liabilities like unemployment and welfare would go down.
President Obama will spend trillions to create or recapture about 3 million jobs (over $250K for each job). My plan of an immigration moratoium (or reduction to 100K per year) from over a million a year would recapture those 3 million jobs in Obama's first term at NO COST to the government/taxpayers.
Acting with determination on illegal immigration and encouraging illegals to leave with a carrot/stick approach would save several million more jobs. In addition to the positive effects of more employed Americans paying taxes and keeping their homes, the liabilities imposed by our massive and excessive immigration would drop and provide a double action to help the economy. We would not need new infrastructure just to keep up and the need for services such as health care, education, and police would drop markedly. Taxes could stabalize or be reduced as well, further boosting the economy. Money could be spent refurbishing our existing infrastructure (which has not been happening) and put into improving education, better reimbursed health care, less crowded jails and better kept police and fire departments.
If we do not take the Immigration reduction approach, every job that is created by Obama's plan will be needed just to keep up with immigration. We will never catch up! The Immigration Moratorium provides the corrective feedback needed to pull us out of recession as well as give long term confidence, especially to our lower end workers.
Challenges is not a sin but if you yield to it become sin.
The only thing that can sustain man is to focus and believe in God for direction. President Obama should continue to trust in God for direction and inspiration on how lead successfully.
King Solomon have an open ticket to request for whatever he desire, he only request for wisdom and understanding.
James 1:5 syas If anyone need wisdom, let him ask…..
[…] statements echoed the sentiments of our own Shah Gilani, who provided guidelines on how to implement effective regulatory reform in Monday’s edition of Money […]
The new President is focusing on all of the important isues,
however, i believe there is one that needs to be looked at. Knowing that the banks are declining to disclose where the billions of tax payer dollers' went, that was given to them to help the foreclorsure crisis, this admistration should now require that all loans are to be a fixed rate loan and no more adjustable loans which means the credit agencies needs to be overhauled whereby people applying for loans' can qualify and have rates that they afford to pay without the fear of what we are now experiencing.
Mr. Shah Gilani,
I saw you on video and listened to your interview. You were impressive!
You are the kind of person the President is looking for: very intelligent, very knowledgeable on our financial system, an excellent communicator, and a middle of the road level headed person. You are charismatic, down to earth, cool headed, tempered and possess similar qualities of the President.
And most important: you have a sound economic and financial plan to make radical changes to our economic and financial system to bring us out of this quagmire. It should be heard and discussed at the highest level of government.
Keith Fitzgerald who received his masters degree in Hawaii from Chaminade University can attest to it. You would fit in very nicely to President Obama, who was raised in Hawaii, as an economic and financial advisor. You have the right temperament.
I hope you get to meet the President in person.
Our country needs the brightest minds to dig ourselves out of this financial quagmire.
You fit the bill.
[…] /> <br /> Gilani on Monday <a target="_blank" href="http://www.moneymorning.com/2009/01/19/financial-crisis-regulations/” target="_blank">published an open letter to President-elect Obama</a> […]
[…] on Monday published an open letter to President-elect Obama in which the credit-crisis expert gave the president-to-be a plan for overhauling the U.S. […]
[…] on Monday published an open letter to President-elect Obama in which the credit-crisis expert gave the president-to-be a plan for overhauling the U.S. […]
[…] Money Morning: An Open Letter to President-Elect Barack Obama: How a Regulatory Makeover Can Fix the Financial Cris…. […]
[…] Money Morning Deregulation Series: An Open Letter to President-Elect Barack Obama: How a Regulatory Makeover Can Fix the Financial Cri…. […]
NOTE TO MONEY MORNING PUBLISHERS ONLY RE: ACCURACY OF TEXT
FYI, see your "Louisiana" listing and please note that Cazayoux is no longer in Congress. He was replaced in a runoff by William "Bill" Cassidy, R-La. Sorry I cannot provide a fax.
Thank you for doing this, we need more of it in this country.
I worked, I was a Social Worker until a truck driver "side ended" my car and totaled my back along with it. I would give anything to be able to work now, especially since my husband divorced me after over 20 years (guess he forgot the in sickness or health part)
My disability amounts to less than than 10,000, including the meager child support I sometimes get. I would not be able to claim anything on a tax rebate, because I make so little that I don't have to pay taxes, I am not seeing anything in this plan that would help me, only those whose make more than me.
[…] are other plans that make more sense and don't facilitate the rich getting richer on the backs of taxpayers. […]
Gilani is spot on. Wall STreet has toiled for years to siphon off billions of dollars to line greedy pockets. That surely is pure capitalism. Capitalism, however is prone to excess on the upside and downside. We take away a solid regulatory structure and tell these guys to self regulate. Kind of like turning a pedophile loose in an amusement park. You know what is going to happen. Wake up folks!
[…] outcome. Unlike the more-aggressive overhaul proposals Money Morning previously outlined for both the regulatory system and the U.S. banking system, the reality here is that the current set of regulators will […]
[…] and stimulus plans put forth by the Bush and Obama administrations. Indeed, just last month, in an open letter to President Barack Obama, Gilani detailed a regulatory plan that he believes would go a long way toward restoring the […]