We fly because of the FAA is doing its job. The FAA exists because the airlines want it to. We invest on Wall Street even though we know the SEC is not doing it's job. Besides proof that greed is more powerful than fear as a motivator in the financial markets, and visa versa for travelers, this shows us that until the financial firms want to be regulated (and call off their dogs in DC), there will be no meaningful financial regulation.
There are a few simple things that the individual investor can do to influence this situation:
- Sell your stocks
- Influence the institutions (it worked with divestiture from South Africa)
- Tell everyone why you are doing it.
Once such an exit from the markets gets going, others will follow if for no other reason than self preservation. Which will drive the markets down further.
Once wall street realizes they need regulation to rebuild trust in the markets, then financial reforms will come easily.
The first to advocate for regulation will be the honest firms -- after all, the guys who were maintaining their airplanes before the FAA had to pick between skimping on maintenance (to be competitive) or advocating for regulation to make the other guys maintain their planes. I don't see any financial firms advocating for regulation yet -- so maybe none of them are honest!
What to do with your money if you take it out of the market? Check out my recommended portfolio allocation here.