1) Reimpose the full aspects of the 1933 Glass-Steagall Act to effectively protect bank assets from the ups and downs of the stock market.
2) Increase the minimum margin requirements for trading in stock and commodity futures from 5% to somewhere between 15% and 20%.
3) Require REAL liquidity backing to trade in derivatives, hedge funds and credit default swaps.
4) Re-write the Sarbanes-Oxley Act to better balance the need for IPO's against better accounting report requirements.
Agree with all your points, with a NB that for we retail investors, margin requirements in most stocks now runs 50% (and 100% on small, under-capitalized stocks) in equities, 10% on commodities contracts.
These margin limits should be enforced on everyone equally. There were hedge funds coming into the 2008 crash that were levered up 15:1 and higher, and i-banks that were levered up to 30:1 and higher. Set the limit at 10% for everyone, more for illiquid instruments, the way the stock exchanges have done for thinly traded, low-cap stocks.
Additional points:
5) Eliminate all dark pools. All equities, options and futures (and options on futures) trades are to be made on exchanges open to all investors. Eliminate ICE, et al.
6) Enforce delivery rules to prevent naked shorting. Make the penalties for inability to deliver very high.
7) Restrict CDS contracts to a sum total of the amount of debt outstanding, require that anyone writing a CDS have capital or debt instrument to deliver/settle the trade. No more naked CDS contracts.
8) Reform accounting for banks. Eliminate “level 3 asset” accounting and mark-to-mythology. Everything has to be marked to market. If the complaint is that there is no market, that should be a clue that the instrument should probably not exist or it shouldn’t be on a bank balance sheet. Banks, when originating debt issues, should be required to “eat their own cooking” — ie, they should not be able to make a bunch of loans, bundle them up and get them completely off their own books and “sell the problem.” All banks originating debt should be required to keep a certain proportion of the issue - say, 15%, until the debt is repaid by the borrower.
Lastly, we should change the model and compensation methods used by the credit rating agencies of S&P, Moody’s and Fitch’s. From here on in, buyers of debt pay for ratings, issuers don’t pay.
Maybe Canadians are just not dumb enough to invest in tons of crap mortgages (or they have no CRA breathing down their necks). I just can't see G-S being a silver arrow for the U.S. financial industry. The one big difference I can find is that Canada actually enforces its security regs/laws. Financial regulation in the U.S. has gotten as ridiculous as "gun control" laws -- a million laws you'll never see enforced.
What's your take on why Canada has far less financial regulation, but sounder banks?