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The second is the competitiveness argument -- the notion that if we don't ease up on U.S. financial institutions, foreigners will eat our lunch like we once merrily consumed theirs. This argument has been at bay for the last year or so, but it surprisingly popped up Wednesday in, of all places, The New York Times. There on the front of Business Day with a bunch of foreign flags festooning the usual Wall Street bull -- can't we find a new bull? -- appeared a story making the case that a "weaker" Wall Street was about to be overrun by foreign banks. This is a gift of talking points to bank lobbyists trying to keep the government out of the industry's coiffed hair. The Times piece is another example of that hoary old chestnut of the competitiveness debate, which former Treasury chief Henry Paulson, precrisis, was last seen promoting: That because of onerous regulation, Wall Street was about to be replaced by freewheeling London. The wonderful thing about this is how transportable an argument it is. Folks in London were recently heard decrying new European Union regulations on hedge funds and private equity, which threatened The City as a financial capital by forcing its speculative crowd to flee to gentler climes, say Hong Kong or Zurich. It would be different if the Times could make its case; but it can't. First, the story indulges in a definitional sprawl that's increasingly common in the press. What is "Wall Street" anyway? What do we mean by "banks"? Are we talking about what, just a few years ago, we referred to as Wall Street firms, say Goldman, Sachs & Co. (NYSE:GS), Morgan Stanley(NYSE:MS) or Merrill Lynch & Co., or are we including universal banks located a stone's throw from Wall Street, like J.P. Morgan Chase & Co. (NYSE:JPM) or Citigroup Inc. (NYSE:C)? Where does Charlotte, N.C.-based Bank of America Corp. (NYSE:BAC), which now owns Merrill and which "Frontline" last night told us (absurdly) was locked into some decades-long blood feud with "Wall Street"? Second, the Times barely noticed how unusual this period has been, particularly for the financing of just about anything, including deals. Using the league tables in this period is like trying to get a read on subprime asset prices in the midst of the meltdown: The instruments are whacked in markets that are only now beginning to recover. Besides, the league tables the Times use simply don't make its case. The paper uses debt rankings, which tells only a small part of the story and one that favors what used to be called large commercial banks. And even with that, the top tier in 2009 remains relatively stars-and-stripes solid, with U.S. institutions in control. And finally, comparing 2009 league tables to 1999 is like comparing current American industry to 1899. The past decade saw an extraordinary amount of change. Third, the Times did notice that a few firms have disappeared -- Bear Stearns Cos. and Lehman Brothers Holdings Inc., neither of which were top league table denizens -- but it failed to recognize the complexity of the disposition of those assets: J.P. Morgan bulks up with Bear, Barclays plc (NYSE:BCS), which really wasn't an investment banking contender, got Lehman, and BofA, which has long been an also-ran in investment banking, grabbed Merrill, which was a macher. (Again, we won't really see how these reshufflings work out until markets return to some sort of normalcy.) Somehow, at this point at least, it's a little hard to see Barclays threatening the upper reaches of the league tables, which includes (as it has for some time) large European institutions like Credit Suisse Group (NYSE:CS) and Deutsche Bank AG (NYSE:DB). Yes, Citigroup and BofA remain saddled with the TARP, but the Times blithely ignores the sheer depth of American firms that may be ready to scarf up market share, including firms like Blackstone Group LP (NYSE:BX) and the multipolar advisory firm, Lazard (which, in any event, poses definitional and geographical issues). Indeed, the Times looks at "Wall Street" and sees devastation and onerous regulation in the U.S. while it seems to believe overseas banks have renewed ambitions and robust health. Really? Some of the new European rules aren't perceived as onerous? The British government hasn't taken over every large U.K. bank except HSBC Holdings plc (NYSE:HBC) and Barclays, which just had to unload Barclays Global to keep itself unencumbered? UBS hasn't suffered grievously? And does the Times really believe that Nomura Holdings Inc., which has added 135 people in New York, is really about to assault the top tiers? And even if any of these firms could grab a piece of the mountaintop, is there any money to be made there right now? And can they hold their spots? These matters are complex and long term. Regulatory arbitrage exists, but so too does the more nuanced argument that finance over the long term follows intelligent regulation, particularly on the buy side. That said, this is an odd choice for a story on any day. But it is particularly an odd choice on the day the administration is announcing new financial regs. - Robert Teitelman See George Soros' op-ed from the Financial Times Robert Teitelman is the editor in chief of The Deal.
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There are two broad realities that will erode the efficacy of any financial regulatory reform over time, no matter how well designed. The first, regulatory capture, cannot be eliminated no matter how regulators are reshuffled or how much everyone promises to be steadfast and good. George Soros in Wednesday's Financial Times 
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This raises two good issues for the "minimization of reforms" and if markets were properly self correcting then they would be appropos. But financial markets on the grandest scale are simply not working because they have been systematically disarmed:
1)Regulators have been captured and by guess who????
2)Financial Markets are far from perfect information and transparency as they become increasingly opaque by deliberate plan - think hedge funds, private equity, and the complex securitisation plus ill-tested/understood financial derivatives.
3)Note the number of huge and well healed financial firms that "cashed in" on their implicit "too big to fail" Moral Hazard Insurance policies. This is the classic "heads I win, tails you lose" policy that has been foisted on taxpayers.
4)Fiduciary trust has been retired in the name of "own account", gaming the system, and targeting for huge compensation pay packets. Financial professionals have no allegiance to a Hippocratic oath of "do no harm to the client". Instead more and more financial transactions are viewed as being zero-sum => my win means you have to lose absolutely. Think naked short selling from September to December 2008.
5)Self regulation and control are minimized because a)there are too many free loaders and b)foreign competitors will put US firms at a competitive disadvantage.
So in the name of US Financial Competitiveness and "Regulators will be captured" dysfunctional financial markets must be tolerated .. nay embraced as the US contribution to the 21st century . Congratulations.