The Solution, Or Trading One Drug for Another?

Today's New York Times' lead - shouting that banks expect borrowers with decent credit to start defaulting - has enough angst in it to cause a run on Zantac at your local drugstore. One would think that would be enough to say that's why you care, and this is your one must read article today.

You'd be wrong. What you REALLY want to do is read their lead today, then go read their lead editorial from yesterday regarding banks and private equity (aka deep pocket investors).

Here's Why You Care: The argument (which the Times editorialized against yesterday) is that, it has all gone to hell and the only way out is for the private deep pockets to invest in the banks so they can start lending again. If that happens, then the machinery that allows everyone to borrow money and make money can start moving again. The catch? The catch is that the private investors want to be free of the rules that essentially say if you buy enough of a bank, then you get regulated like one.

Here's another reason Why You Care: The Times makes some very good points regarding a lack of regulation and fancy math being the twin sirens that have grounded our collective financial ship. But, when you wake up Monday and read today's headline, you start to get the picture of just the type of pressure regulators will be under from private investors who say, "hey, we've got away out" all the while each day's headline points to further meltdown. In other words, does this end up being part of the solution, or would this really be like trading one drug habit for another?

The Sunday editorial did a good job of showing the behind the scenes debate. To best understand it and whether regulators will bend is to read both pieces together. Then you'll really understand why you care.