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Risk Management

10:23 AM
Kerry Massaro
Kerry Massaro
Commentary
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Muriel Siebert Says Regulators Must End Systemic Crisis

Siebert says we are witnessing a sea change that if properly regulated could see restoration of confidence, and if ignored could turn into a historic financial disaster.


Muriel Siebert, the first woman member of the New York Stock Exchange and founder of Siebert Financial Services, the oldest discount brokerage house, has warned over the years that lack of regulation and lack of transparency would bring on a Wall Street crisis of "historic proportions." Siebert, a former New York Banking Superintendent, notes in an email that her warnings have come to fruition. "This is the worst crisis I have ever lived through in all my years on Wall Street. It is historic," says Siebert. Siebert believes that regulators must end this "systemic crisis" in the financial markets and in the banking system.

Muriel Siebert, CEO and Founder, Siebert Financial Corp.

Siebert believes that this is the time for the federal government, including the SEC, and market regulators to take strong action to restore regulations, including rules that would force investment banks, and brokerages to disclose the true value of securitized instruments. She long has advocated rules to strengthen margin requirements and transparency to prevent the kind of crisis we are now witnessing. Since the market crash of 1987, the bankruptcy of Enron and the collapse of Long Term Capital, Siebert has frequently testified before Congress and has advocated stronger regulation limiting how investment banks and commercial banks should operate.

"What is happening this week is an example of unfettered greed fueled by lack of regulations that is causing great harm to the capital raising mechanism. It is time to restore order to the markets," she says in an email.

Siebert says we are witnessing a sea change that if properly regulated could see restoration of confidence, and if ignored could turn into a historic financial disaster.

In a several interviews with Advanced Trading over the past two months, Siebert noted her desire to sit down with regulators to discuss how to stem the turmoil in the markets. She had put in calls to SEC Chairman Cox and written to Federal Reserve Chairman Bernanke and Treasury Secretary Paulson. Some of the things she was calling for included the creation of a financial services advisory committee to the SEC, larger cash reserves for commodities trading, and daily reporting of short selling.

In discussing the credit crisis with Advanced Trading, Editor in Chief Kerry Massaro, she said, "Who would have ever thought the major banks could get into this trouble? When I heard 'subprime,' I thought, 'Oh, it's just a little slice.' But these turned out to be greedy little piggies."

She continued, "This is serious stuff. When the Fed lays on extra liquidity support [referring to Fannie Mae and Freddie Mac], you know we need new regulation. When the Glass-Steagall was reformed, and banks took on the roles of brokers and brokers took on the roles of banks, we created something that wasn't so good."

Read the Q&A with Muriel Siebert.

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