Two years after the collapse of Lehman Brothers, Muriel Siebert, often known as "Mickie," stopped by the offices of DailyFinance at Aol to discuss what she calls a shocking event.
Siebert is the founder and chairwoman of Muriel Siebert & Co. since 1969 and of Siebert Financial Corp. since the mid-1990s. She was also the first woman to become a member of the New York Stock Exchange and the creator of one of the nation's first discount brokerage firms.
Often referred to as "The First Woman of Finance," she was the Superintendent of Banks for the State of New York from 1977 to 1982, where she oversaw all the banks in the state. While there were bank failures across the country during her tenure, not one bank failed in New York while Siebert was in charge.
Bailouts: "A Necessary Evil"
Looking back, Siebert says she never expected a crisis of the magnitude of the Lehman Brothers collapse, nor did she anticipate the subsequent unraveling of the U.S. economy. But she had long been an advocate of greater bank regulation, and she warned for years that a crisis would come unless more strict controls were put in place. She often spoke out on behalf of the common investor, arguing for greater transparency and tougher margin requirements. After the fall of Enron and Long Term Capital, see continued to call for tougher regulations, testifying before Congress. Now, reflecting back, she observes, "Transparency has gotten worse instead of better."
Siebert, who calls the government bailouts a necessary evil, praises the government for taking steps to turn the economy around. But what about the decision to let Lehman Brothers fail after rushing to bailout Bear Stearns? "You don't bailout some and not others," says Siebert. She goes on: "We had something that was really right close to total collapse. One firm would have triggered another ones going broke because there's so much interplay between them when they trade on the money owed for trades."
Same Strokes for Similar Folks
When Lehman collapsed, Siebert started calling for more global regulation. "I became aware of this [global regulation] and very sensitive to it when the hedge funds could not borrow enough money here because we have margin requirements," she says. "They went to London where you can borrow whatever a bank will loan you! We have to have the same strokes for similar folks."
Since then, the government has taken steps to address financial reform, and more recently, regulators from around the world met in Basel, Switzerland, to develop global regulations which include more than doubling the capital requirements of the world's banks over the next eight years.
Potential Danger Still Lurks
But that is not enough. Siebert says we need to know which banks are trading in derivatives and whether they are borrowing on them. "It's totally unfair to expect the public, which has been a great supporter of the financial markets, to borrow money without seeing a true balance sheet," she points out.
Siebert is also calling for greater regulation around other areas that she warns could be dangerous and lead to more problems in the future. One such area is flash trading, which allows some investors to see incoming orders to buy or sell securities a few milliseconds earlier than general investors. Another: dark pools -- the private exchanges between firms and institutions that provide liquidity but are not displayed on order books. They allow traders to move large numbers of shares without identifying themselves, leaving individual investors blindsided.
If the last two years teach us anything, perhaps it's that we should heed such warnings.