Stock investors are watching closely to see how President Barack Obama’s proposed changes to regulation of financial services may affect them.
President Obama’s plan to reorganize the financial landscape is a sweeping change from the current “anything goes” disaster zone.
It goes too far for some and not far enough for others.
Those opposing the plans have forgotten how unrestrained greed almost toppled not only our economy, but threatened the world with financial disaster.
Those wanting even stronger restraints have forgotten how the wet blanket of over-regulation stifles innovation.
Goldilocks Rules
What we need is a “Goldilocks” plan – not too hot, not too cold, but just right.
The odds of hitting that mark are not good. The good news is regulations are self-correcting and if the implemented rules swing too far in one direction, politics will tend to pull them back towards the center over time.
Clearly, the financial world has changed in ways existing regulations did not anticipate.
While it is important to encourage innovation and continued growth, the regulations must catch up with reality.
The president has outlined some lofty goals after administration officials met with key stakeholders over the past weeks.
Details
The “devil is in the details” as people are fond of saying. We will have to wait to see how this plays out in the coming months.
For stock investors, the danger is not in over regulation, but in relaxing our due diligence, assuming the new rules offer more protection.
The same rules of risk and reward still apply: if there is a big potential payoff, there is also a big risk, even if it is hidden from view.
Buyer beware.
