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Chapter 15. Can America Lead? > Why Current Regulation Isn't Working Well Enoug...

Why Current Regulation Isn't Working Well Enough

The capital markets have a special significance to the economy and aren't treated like other markets. They are more regulated, for the good of all, and they need better regulation now if faith isn't to be lost and the economy further damaged.

Although capital markets in Germany and the United States are highly regulated, financial firms can get away with things not permitted in other industries. In the capital markets, a company can sell a product to the public which completely fails to produce its benefits within a short time, and yet the public has virtually no protection against the seller. In fact, the seller is allowed to stand behind boilerplate language in the selling documents which absolve the seller of all responsibility if the product doesn't work, but which is belied by the selling pitch of the sellers' agents. In no other area of the economy, with the possible exception of homeopathic medicine, is this the case. For example, cigarette companies are no longer protected from legal liability to the injured by the boilerplate language on packages of cigarettes: WARNING—THIS PRODUCT MAY BE HAZARDOUS TO YOUR HEALTH. But underwriters still claim protection based on the boilerplate language of offering documents.


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