MORGANTOWN – Eminent disaster may be on the horizon for the U.S. economy according to the book “When the Levees Break: Re-Visioning Regulation of the Securities Markets.”
Written by West Virginia University professors Karen Kunz and Jena Martin, the book outlines how dysfunctional the U.S. securities market is and offers solutions on how to fix it.
One of the solutions that Kunz and Martin discuss in the book is incorporating an entirely new system that integrates a “holistic regulatory structure.” The two think that regulations would work much better as long as they are targeted and align with how the market currently works.
“Our economy is becoming increasingly dependent on a system of trading that only a handful of people understand and that handful of people ironically does not include most of our regulators,” Martin, who is a law professor at WVU with expertise gained from her time at the U.S. Securities and Exchange Commission, told the West Virginia Record.
According to Kunz and Martin, no one agency looks at the whole picture of the securities market, leaving the U.S. open to a major collapse. In the next crisis, institutions will not be too big to fail, they will be too big to save.
“Every time something happens, regulators roll up and stick a finger in the dike and hope to god that will solve the problem,” Kunz, who is a public administration profession at WVU specializing in financial market regulation and fiscal policy, told the West Virginia Record. “They don’t have enough fingers to fill the holes. The dike’s falling apart. Let’s make a new one.”
On the certainty of a crisis hitting the U.S. economy, both Kunz and Martin emphatically agree that it is almost unavoidable.
“If you were going to buy stock in something, I would buy stock in that,” Kunz said.
“We are just one glitch, scandal, or tweet away from a complete market collapse,” said Martin. “I think it will make the Great Depression look like a weekend at the beach.”
The book discusses the 2008 collapse of Lehman Brothers and AIG and the 1998 tech bubble and the effects they had on the economy.
Kunz also cited examples of giants Amazon, Google, and Apple and how their quarterly earnings can have a big impact on the market in today’s economy, making it fluctuate heavily in one direction or the other with just a quarterly announcement.
Both Kunz and Martin want to start a dialogue about what can be done to fix today’s securities markets and open people’s eyes to the potential trouble ahead.
“We want people to start talking about this,” said Martin. “We want to make people aware that this is on the horizon so we can hopefully stop the flood before it starts.”
While both Kunz and Martin enjoyed writing the book, they both admit it often kept them awake at night knowing the costs of what could be to come for the U.S. market.
“I had a lot of fun writing the book because it was with Karen, but then I thought about the consequences and it was hard to sleep at night,” Martin said.