Risk Management on Wall Street and in the Gulf

 |  NCR Today

Our capitalist system is built upon risk. Investors risk their money in new enterprises. Entrepreneurs risk their time and careers. Some ventures succeed and others fail, and the market determines which is which.

Sometimes, however, there are other risks. The Congress is currently considering financial reform and the Volcker Rule is at the center of the debate. This Rule would prevent banks from using their own money to invest in risky hedge funds and other similar investments. The reason for the Rule is that people who deposit their money in a bank should not see their risks multiplied exponentially because a few bank executives want to get rich quick. A hedge fund may provide a windfall, but the Volcker Rule is a regulatory hedge against greed leading to the kinds of risky decisions that will redound badly not just upon the bank executives taking the risk, but upon the average customer of the bank. There is a danger that the Rule will be suspended for further study, but Washington is not a university, and “study” is a euphemism for killing the Rule. Congress should resist the lobbyists for the banks and pass the Rule.

Another example of the need for government to manage risk continues to unfold, or leak, or spill, in the Gulf of Mexico. The investors in British Petroleum risked their money to get at the profitable oil reserves underneath the Gulf. But, they should not have the right to risk the ecosystem of the entire southeastern United States. The government is the only actor with the power and the authority to step in and require companies engaged in off-shore oil drilling to adopt the strictest of safety measures and, should such measures prove inadequate, to ban further drilling.

NCR-Podcast-logo_web.jpgListen to the latest episode of the NCR podcast.

Life entails risk. There is no avoiding it. But, some risks are not worth taking and it is up to the people, speaking through their government, to decide which risks are worthwhile and which are not, and to manage the risks that are taken. This is not anti-capitalist. It is the only way to save capitalism from its propensity to excess. Further, it is the only way to ensure that the economy serves man and not the other way round. That is a fundamental, dare we say a “non-negotiable,” principle of Catholic Social Teaching.

Support independent reporting on important issues.

 One family graphic_2016_250x103.jpg


NCR Comment code: (Comments can be found below)

Before you can post a comment, you must verify your email address at Disqus.com/verify.
Comments from unverified email addresses will be deleted.

  • Be respectful. Do not attack the writer. Take on the idea, not the messenger.
  • Don't use obscene, profane or vulgar language.
  • Stay on point. Comments that stray from the original idea will be deleted. NCR reserves the right to close comment threads when discussions are no longer productive.

We are not able to monitor every comment that comes through. If you see something objectionable, please click the "Report abuse" button. Once a comment has been flagged, an NCR staff member will investigate.

For more detailed guidelines, visit our User Guidelines page.

For help on how to post a comment, visit our reference page.

Commenting is available during business hours, Central time, USA. Commenting is not available in the evenings, over weekends and on holidays. More details are available here. Comments are open on NCR's Facebook page.



NCR Email Alerts


In This Issue

June 16-29, 2017