Since the government is blamed for all ills and catastrophes it should be praised for the good and right that it does. The SEC said yesterday that brokerages could not keep the dirty little secrets of their capital problems to themselves.
According to The Wall Street Journal "SEC Chairman Christopher Cox said in a speech Wednesday that the four largest investment banks overseen by the SEC will disclose "actual capital and liquidity positions…in terms that the market can readily understand and digest."
One of the reasons that investors, both individual and institutional, got burned in the current run down in the stocks of brokers and banks is that no one outside the firms could see how bad things were. The titanic problems on Wall St. were not visible. The case, unfortunately, is that Wall St. did not want them seen. Frightened investors could have run for the hills as they did with Bear Stearns (BCS).
While money center banks were forced to make some disclosures during the crisis, very little was required of brokerages. That would now appeared to be remedied.
There may be a bit of hidden good news in the timing of the SEC initiative. The chairman may feel that enough of the trouble at brokers is past and that disclosure will not cause huge turmoil. The government has been know to act with convenient timing before.
Douglas A. McIntyre
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