Whatever happened to Integrity

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With a world going haywire and people from all walks of life losing “integrity”, have you ever asked yourself why is integrity so rare these days and what to do to restore it?.

In the first place … What does integrity really mean?

Without looking in a dictionary, but just going on my own experience . . .

Integrity means a person is honest and honorable, keeps his promises, tells the truth, and can be counted on to do the right thing, even when it is hard or uncomfortable. Such a person does not betray friends or let down people…. But it’s about more than just telling the truth.

Integrity is about keeping promises and doing what you tell others you’re going to do, as well as what you tell yourself you’re going to do.

People with integrity show up and follow through. Their word is good.

They are the people who maintain sanity in their brain, heart and body at the most insane times of Life and basically never compromise on their principles and values even in the toughest times. One clearly needs to be strong both emotionally and mentally to maintain his/her integrity. It is quiet hard indeed.

Why is integrity so rare these days?

I personally believe it is because of the lack of trust ever pervasive in today’s world.

Communications and expectations are clearly two vital elements in measuring trust.

To an extraordinary extent, the age in which we live in today is requiring us to redefine trust and the degree to which communication and expectation contribute to it.

Consider simpler times a few years past (say 50). Trust was necessary in many venues as a means of survival on a day to day basis. We relied on others extensively for our well being from our local store to our banker, from the policeman to the politician. And we knew them all better, we could reach out and touch them and we were not viewing them in sound bites and web sites, nor were we being bombarded with multiple forms of input to digest about them.

Mass marketing and communications has created expectations beyond reality in venues from romance web sites to building wealth. We must come down to earth and become much more sophisticated in the manner with which we view all this input and sift it in a meaningful way to have true trust. If we do not, we run a high risk and that fact is inescapable.

Taking it from a different perspective…. Every day, millions of people drink tap water without fearing for their lives. The incidence of people dying from this is virtually zero. If somebody does, it’s a huge deal, making national news.

Every day, millions of people commute to work. The chances of any given person dying during any particular commute the way is so absurdly low that nobody makes any contingency plans for it or even believes it is possible. There are accidents every day, but given the total volume, they are rare.

Your car consists of tens of thousands of finely engineered parts, each one of which has extremely precise tolerances. A defect rate of 1% in these parts would mean your car probably wouldn’t even start. Most cars, if reasonably maintained, will drive for over 100,000 miles.

Your computer has millions of transistors. A single grain of dust landing on the chip during the manufacturing process would mean that it simply wouldn’t start. Most computers work fine out of the box.

In short, modern life is only possible by millions of people making millions of decisions correctly and with integrity, every day. If people failed in their duties even 1% of the time, modern civilization would come to a screeching halt almost immediately.

So why do we perceive integrity to be rare? I guess because we know how much we depend on it, and we make a really big deal out of it when its lacking. We see all the cases where things go wrong, and never think about the vast number of situations where it all goes right. Nobody thanks the electric utility when the lights stay on.

So what is there to do to restore integrity around?

To a very large degree this is a personal responsibility.

Integrity is in a way very costly thing to maintain, requires boldness, needs mental strength, ability to withstand tsunamis in your career and you should keep large lock on your mouth.

It’s like being happy with what you have got and follow certain rules and regulations without any compromise. You should believe in yourself and on your capabilities. You should not have fear or do anything which causes fear.

Your hands should be clean, you should be in a position to throw your accounts on any one for checking and come back and do your work.

Bottom Line: Never try to act loyal and plan to kill someone’s career. Never befriend someone for ulterior motives. Never undermine someone’s development. Go the extra mile when you approve a bill of a needy person. Work an extra hour to bring some profits for the organization, and when something wrong is being done in your presence – try and stop it.

It is clearly important to have leaders that are incorruptible. Nothing destroys the faith of people and nations faster than seeing the leaders we gave this faith to abuse and misuse it. If we cannot trust our governments, businesses, communities or any other organizations, we often turn inwards. As a result, when people are perceived to be less trustworthy and possessing less integrity, they often turn out to be so. In the end paradoxically, we can then only trust that our fellow man cannot be trusted

“Can I trust you 100% of the time?”

If someone says yes, he is most likely lying. Be careful!

If someone is honest enough to say no, then maybe you have some reason to trust him/her.

At the end of the day, only the most honest person can admit that he/she is not perfect and we all have moments of vulnerability.

Share your thoughts.

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Building a Crisis Resilient Financial System

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I consider the Financial crisis of 2007–2008 to be an inevitable consequence of “Moral Hazard” in the finance industry. Banks made profits on risky investments during the boom but taxpayers shared the losses when the investments went bad, thus encouraging riskier behavior.

In my view:

Capitalism generates wealth by allowing the free market to reward the good and punish the bad. If that can’t happen, capitalism does not work. Ideally, the banks which had lent irresponsibly and the individuals and businesses which had taken loans they could not afford would have all gone bankrupt and everyone would have learned their lesson.

Unfortunately, the financial system was characterized by Moral Hazard. The banks convinced themselves they could write bad loans and still make money, because they had devised complex financial instruments which spread the risk so widely that almost every bank in the world was exposed to it. The system became so interconnected that it wasn’t possible to let the “bad” parts of the system fail because they could not be distinguished from the “good” parts. Faced with the possibility of all their banks going bust or bailing them out, many national governments felt obliged to do the latter. This is textbook moral hazard because the entity bearing the losses is not the entity profiting from the original transaction.

The financial system may well have recovered more quickly if the bailouts hadn’t happened, but the suffering in the meantime would most likely have been unacceptable. Everyone who had savings would have seen them wiped out and a great many businesses would have ceased trading because they depend on credit for their cash flow, resulting in mass unemployment. Military coups in previously stable democratic countries could not have been ruled out and the prospect of extreme left or right wing groups taking control would have been a real possibility. The global economy was able to absorb localized banking collapses such as that in Iceland or of Lehman Brothers, but the human cost of a wider collapse would have been far worse.

The bailouts have been “successful” in the sense that some stability has returned, but they have not solved the underlying problem. Despite commitments in some areas to split up retail and investment banking and to improve capital ratios, the moral hazard remains because banks know they are too big to fail and will be bailed out again should the need arise. Only a total, irreversible disengagement of government from the financial sector could resolve this, and that is politically unrealistic. The main issue remains that the real cost of the bailouts is that they have reinforced the promise which was the root cause of the problem, that governments are there to rescue the banks when they fail.

How can we avoid another 2007-2008 type Financial Crisis in the Future?

I believe:

  • The section of the Glass-Steagall Act of 1933 repealed in 1999 which separated Commercial Banking from Investment Banking and from Insurance must be reinstated, because the Volcker Rule is too hard for regulators to operate/enforce. The bright line rule was much easier to enforce because the lines were very clear. Need to do something special across disciplines? Syndicate it. Money’s too fungible to rely on anything other than legally separate corporate entities, and having Bank Deposit Insurance (i.e. FDIC) on one side of the same house invites cross-subsidization of risk (i.e. abuse, moral hazard).
  • Too big to Fail Financial Institutions must not be allowed to exist – the “living will” requirement is silly nonsense, and will be found to have not been properly updated for a given such institution that gets in trouble in the future. If it’s too big to be allowed to fail, it’s too big to be allowed to exist at all, and the current ones must be cut down to size. This means setting hard limits in law, like the law that prohibits any single deposit-taking bank from having more than 10% of the deposits of the USA (Bank of America is just under the limit, and we might want to think about lowering that one to 5%). The limits must be stated in percentages of economic measures (e.g. GDP) rather than particular dollar amounts. This can be viewed as in the same economic policy vein as Antitrust Law: require a minimum number of entities (prevent cartels, oligopolies, and monopolies) to ensure competition and resultant efficient allocation of capital.
  • Once they’re separate again, Investment Banks must be prohibited from being Public Companies, i.e. selling shares of stock on the public markets to all comers – they must be legally restricted to being Corporate Partnerships. Investment banks walk on the high wire, taking lots of risk, and that risk shifts around much too fast for uninvolved investors to monitor the management – that’s a straight Principal-Agent Problem. I don’t want to restrict their ability to leverage to the skies if they want to – I just want to be able to not care if they screw up & go bust in so doing. If the managers are required to be the owners, the problem goes away. Hell, the managers have every incentive to monitor each other!
  • Credit Default Swaps are insurance, and must be regulated as such. I’m sure that a review of all financial instruments will find very little is actually new under the sun – just the names have been changed to avoid existing regulations (which are usually born out of hard-won experience). That has to stop, which is to say, again, bright line rules for what things are being bought and sold in broad categories, with established regulations on them.

The Dodd-Frank Wall Street Reform and Consumer Protection Act fixed exactly none of these problems – it papered them over. Paul Volcker is a very, very smart economist and legendary former chairman of the U.S. Federal Reserve, and his rule as he states it is the right thing in principle, but the regulations they wrote to define all the terms & conditions are so grey and messy (and probably pliable or go-around-able) that I think the point is probably lost. That’s why I want legally separated corporations in these differently regulated businesses back. Easy, obvious, bright-line rule.

Share your thoughts.

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Raising Money For Non-Profit Organization – Ziad K Abdelnour

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I am frequently asked if there is a better way to raise money for non-profits than having to constantly ask for repeated contributions.

Well … I believe there are many ways to do so. Some are very non-traditional. Of course, if you are trying to raise millions or hundreds of thousands, you have a very limited number of things you can do because few sources have that much.

But if you are ok with raising smaller amounts, you can get loans, donations, grants, and do various side hustle things or a large number of other simple money-generating things.

The best way to pull your non-profit out of the rut of having to make a million small asks, run a million small events, and send out monthly fundraising letters is to develop a strong annual giving program.

Annual giving programs focus on small and medium sized donors, with the goal of building a core group of recurring donors — donors who give year after year.  Each year, some donors fall off the radar, and others come on board, but the end result is that your non-profit has a base amount of revenue that can be banked on each year.  Ideally, with work from your development office, this base amount will grow year in and year out.

As you cultivate individual givers for your annual giving program, you will want to try to get a number of them to sign up for multi-year (3 or 5 year) commitments.

Of course, no fundraising method is work-free.  Your development office will need to work hard to build this annual giving program through the standard channels:  building a prospect universe, introducing donors to your organization, cultivating them, getting them involved, and moving them to a one-year or multi-year gift.  The benefit with the annual giving model is that this program is scalable, and you can build upon previous year’s efforts with a stable of recurring donors.

Repeated requests for contributions is the marketing function of a charity.  You will always need to ask repeatedly, and your goal should be to do this well.  Just like a commercial enterprise must do.  Your donors are your stakeholders, and must have a vested interest in the quality of work you are doing.  The best way to not have to ‘ask’ for contributions is to be so excellent at what you do, that they ask you to please take their money.

Anyone involved in fundraising nowadays should realize that it is one of the most dynamic, exciting professions that exists. What makes it special is that it has a unique ‘win win’ dynamic built in philanthropically.  The charity asks and then proves worthwhile to be supported and when the donor decides to give their money they get as much reward for doing so as does the charity.  Many people live lives filled with ‘quiet desperation’.  Giving to a cause that is special to them brings happiness, a sense of renewal and pride in their affiliation that rejuvenates them towards feeling that indeed they are have a worthwhile purpose beyond their dull comfortable lives.

Yes, you can avoid all these ‘asks’ by coming up with some sort of commercial enterprise that will support your work…. or you can bring your supporters on their own individual ‘donor journey’ . . . creating commitment to the cause, engaging them as volunteers and directly in the work.  You can bring them along from the occasional donor, to the committed regular giver by direct monthly payment, to securing corporate support at the office, to become a major donor when their children leave home, and then planned giving and/or a legacy upon their death.  Aim for the long term investment of stakeholders who are passionate about your cause — the money will follow.  It’s an exciting experience to watch their lives transformed.

You don’t always have to be focused on “asking for money.” People who are connected to your organization (especially volunteers) and who have an abiding and deep interest in it will be the ones most interested in, and committed to, sustaining it. (But don’t stick your volunteers with the jobs you don’t want to do, like calling to ask for money, or stuffing envelopes, because they won’t want to do them either.) You won’t have to do much asking of people who are already involved.

Make it easy to actually get involved. Ask a friend to ask another friend for their help and advice (genuinely ask – not just as a means of raising money from them) and you’ll build supporters who will be committed to you. Create ripples of engagement and interest in the community by bringing people together to help you figure out how to keep your organization going. You’re interested in it, right? So other people should be, too. They’ll be your front line of supporters.

And think creative. Keep those ripples spreading. Let other people do the asking. Get other people involved.

The answers that advocate recurring donations are exactly right: the recurring donation, even each gift seems relatively smaller, adds up over time, and is significantly more efficient than having to return to the donor again and again to ask for a new gift.

I’d add that for “person to person” style giving , the monthly recurring gift is king, as opposed to the annual.

Monthly giving engages the donor on a loyalty and relational basis, allowing opportunity for regular touches throughout the year instead of risking the collapse of vision over a year. And donors tend to give monthly amounts out of their budget rather than their wealth (or tax-related gifts), which can be significantly more reliable.

One very important step your nonprofit can take to move away from repeated asks is to invest in a sustainer giving program where a donor gives a monthly, or quarterly, recurring gift on a credit or debit card.  Once the recurring gift is in place my experience is that donors let the gift continue for a long period of time.  I suggest branding the giving circle, and address the members in a different way, such as with a special newsletter or branded email series, to let them know how important they are to the organization.

Also, here again, suggest to donors that they consider a multi-year pledge.  This allows the nonprofit to save time and resources by not having to  re-solicit the donor each year, and can allow a donor a bigger naming opportunity then they might be able to do over one year, and helps the nonprofit with revenue forecasting.

Ziggedy is a brand new fundraising option for non profits or charities. As a user you simply have to shop on Ziggedy

through partnered businesses and 50% of this referral commission goes to the charity of your choice. If you are already shopping online I think it is a great option to raise money at no cost to you.

There are other creative ways too such as raising money through hosting annual dinner events which include silent auctions and dancing. If possible, solicit from client base the products that are auctioned off – contributions which are also great ways of a company showing support for the non-profit, as well as getting those products in front of friendly audience.
Hope all of this helps.
Please share your thoughts.

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The Power to turn the US Economy – Financial Policy Council

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People keep asking me what would I do if I had the power to turn the US Economy around given my 25 year experience on Wall Street

Well here’s my 2 cents…. Fasten your seat belts.

I believe the first thing to be done is to abolish the Federal Reserve. It is owned by and operated for the benefit of the biggest banks in the world. Its sole purpose has been to enrich the few at the expense of the many through its insidious use of inflation and debt issuance. It has been around for less than 100 years and has debased the USD by 96%. The U.S. Treasury has the authority to issue the currency of the country. It did so from 1789 until 1913.

The 2nd thing to do would be to reinstitute the Glass-Steagall Act because Wall Street cannot be trusted to manage their risk properly. This would separate true banking activities from the high risk gambling that brought the economic system to its knees. Privatizing the profits and socializing the losses is unacceptable.

The FASB would be directed to make all banks and financial corporations value their assets at their true market value. This would reveal the mega Wall Street banks and corporations like GE to be insolvent. An orderly bankruptcy of all insolvent financial firms involving the sell-off of their legitimate assets to well-run risk adverse banks that didn’t screw up would ensue. Bondholders and stockholders would realize their losses for awful investment decisions. The economic system would be purged of its bad debt.

The currency of the US would be backed by hard assets. A basket of gold, silver, platinum, uranium, and some other limited hard commodities would back the USD. If politicians attempted to spend too much, the price of this basket would reflect their inflationary schemes immediately.

The 16th Amendment would be repealed and the income tax would be scraped. It would be replaced with a national consumption tax. The more you consume, the more taxes you pay. Wages, savings and investment would be untaxed. The tax code is the source for much of politicians’ power. Its demise would further reduce Washington DC control over our lives.

A downsizing of the US Military from $1 trillion to $500 billion annually would be initiated through the withdrawal of troops from Afghanistan, Iraq, Germany, Japan and hundreds of other bases throughout the world. Policing the world is bankrupting the empire.

All corporate, farm, education, and social engineering subsidies would be eliminated. All Federal employees would have their pay slashed by 10% and the workforce would be reduced by 20% over 5 years. Federal health benefits and pension benefits would be set at average private industry levels.

The Social Security System would be completely overhauled. Anyone 50 or older would get exactly what they were promised. The age for collecting SS would be gradually raised to 72 over the next 15 years. Those between 25 and 50 would be given the option to opt out of SS. They would be given their contributions to invest as they see fit if they opt out. Anyone entering the workforce today would not pay in or receive any benefits. The wage limit for SS would be eliminated and the tax rate would be reduced from 6.2% to 3%.

The Medicare system is unsustainable. It would be converted from a government program to private market based program. The Federal mandates, rules and regulations would be eliminated. Senior citizens would be given healthcare vouchers which they would be free to use with any insurance company or doctor based on price and quality. Insurance companies would compete for business on a national basis. Doctors would compete for business. The GAO would have their budget doubled and they would audit Medicare fraud & Medicaid fraud and prosecute the criminals without impunity.

The healthcare bill would be repealed. Insurance companies would be allowed to compete with each other on a national basis. Tort reform would be implemented so that doctors could do their jobs without fear of being destroyed by slimy personal injury lawyers. Doctors would need to post their costs for various procedures. Price and quality would drive the healthcare market.

The entitlement state would be dismantled. The criteria for collecting welfare, SSDI, food stamps and unemployment benefits would be made much stricter. Unemployed people collecting government payments would be required to clean up parks, volunteer at community charity organizations, pick up trash along highways, fix and paint houses in their neighborhoods and generally keep busy in a productive manner for society.

A free market method for stabilizing the housing market would be for banks to voluntarily reduce the mortgage balances of underwater homeowners in exchange for a PAR (Property Appreciation Right). The homeowner would agree to pay off the PAR to the Treasury (and administered through the IRS) out of future price appreciation on the existing home or subsequent property. The homeowner would be excluded from taking on any home equity loans or executing any “cash out” refinancing until the PAR was satisfied. The maximum PAR obligation accepted by the Treasury would be based on the value of the home and the income of the homeowner.

I’m sure there are many more solutions which non-captured, intelligent, reasonable citizens could put forth to save this country. None of these ideas would be acceptable to the country’s owners. They would reduce their wealth and power. What these oligarchs do not realize is that we are in the midst of a Fourth Turning. Those who experienced the last one have died off. The existing social order will be swept away. It is likely to be violent and bloody. Good people and bad people will die. When the Crisis reaches its climax we will have the opportunity to implement good solutions. There is also the distinct possibility that our increasingly ignorant populace will turn to a messianic psychopath that promises them renewed glory. Decades of delusional decisions will lead to a future that will not be orderly or controllable.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained growth and recovery. If the suffering becomes great enough, change will inevitably come, but it may not be orderly or as controllable as the moneyed interests often like to think.

I just hope all those prescriptions will not go unheeded although they certainly go far, long-term, in fixing a system which is quite dysfunctional and broken.

Draining the swamp of our present economic morass will certainly require drastic action tantamount to a real revolution in both thought and practice.

The Old Order has gotten us into this mess, and cannot, or is unwilling, to get us out. It is past time for them to go.

Quick fixes to jump starting a moribund economy would include: blowing another bubble of some sort, and/or promoting a policy of economic growth driven by technological innovation (not likely due to policy constraints and dearth of investment in technology in this country); reduction in interest rates and/or taxes (interest rates cannot be further reduced because they are already close to 0%, and a tax reduction is not permissible in an environment of planned government expansion); stabilization of a tax code which promotes savings and investment (a real hot potato in a society guided by elites who are staunch supporters of egalitarianism for the masses); debasement of the dollar to stimulate export growth (with serious inflationary implications); and austerity (where the gains of the malefactors who profited in the economy’s demise will stay in guilty hands, and the ever-shrinking middle class which generally attempted to do the right thing will become progressively pauperized).

Nothing much in a positive, productive sense can be accomplished under our government, as presently constituted, as it has devolved into a Fascistic, crony-corporatist construct.

Government is where the real change must occur. Our venal Solons should be term-limited to a maximum of two terms per position and have to live most of their lives as common citizens in the legal environment they have helped create. Campaign contributions should be tightly restricted and controlled (no more obscene, billion dollar campaigns). Congressional retirement should be provided only via Social Security or other funds which are open to all persons who choose to join – no more special congressional sweetheart programs. And health insurance would be afforded either privately or within the same public health program available to everyone else – no Obamacare exemptions.

Until those who govern are forced to experience outcomes consistent with those experienced by the governed, I am afraid the Republic will drift ever further away from the establishment principles envisioned by those rebellious Founders, who were intoxicated upon the fumes of liberty, fraternity, and equality of opportunity.

Now you know

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About the Power Brokers Shaping Our Global Capital Markets

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I believe four major actors—petrodollar investors, Asian central banks, hedge funds, and private equity—are today’s the key power brokers playing an increasingly important role in the world’s financial markets.

Excluding cross-investments between them, oil investors, Asian central banks, hedge funds, and private-equity firms together held $20 trillion in assets at the end of 2012. Their assets have tripled since 2000, making them two-thirds the size of global pension funds.

Together these four players are reshaping global capital markets in a major way. They each represent large new pools of liquidity with longer-term investment horizons than traditional investors that allow them to pursue higher returns—and risks. They have markedly diversified the investor base and expanded private markets for capital. They are spurring financial innovation, enabling the more efficient spreading of risk, and spreading liquidity.

Although the boom years ended in late 2008 as the financial crisis escalated and the global economy slumped, we believe the power brokers fared relatively well though their paths have greatly diverged: petrodollar and Asian sovereign investors are more influential than ever, while the rapid growth of hedge funds and private-equity firms has halted abruptly.

Petrodollar investors—including central banks, sovereign-wealth funds, high-net-worth individuals, and other investors from the major oil-exporting countries—remain today the largest of the four classes of power brokers over the next five years under all of our scenarios. In the base case, we project that the foreign financial assets of these investors will rise to nearly $9 trillion by year end 2013. In the quick fix, with the price of oil staying at nearly $100 a barrel, their assets grow to more than $13 trillion, nearly half as large as the assets of the world’s pension funds for that same year.

The sovereign investors of Asia—its central banks and sovereign-wealth funds—see their foreign wealth grow to $7.5 trillion by year end 2013 in our base case. China, with its foreign financial assets growing to $4 trillion, accounts for more than half of this total, though its current-account surplus declines relative to GDP. In the quick fix, with world GDP and trade recovering more quickly, the foreign assets of Asian sovereign investors grow to $8.5 trillion.

Regarding the hedge fund industry, although it is starting to slowly recover from the bloodbath of 5 years ago, we expect assets to recover slowly to $1.5 trillion by year end 2013. That’s slightly better than the total at the end of 2008 but still well below the peak in 2007. A major constraint on the growth of hedge funds is the size of their investors’ portfolios: the collective wealth of pension funds, insurance companies, endowments, sovereign-wealth funds, high-net-worth individuals, and other such investors fell from $91 trillion in 2007 to an estimated $75 trillion by the end of 2008. In our conservative base-case scenario, battered but resilient, in which the economic recovery doesn’t begin until mid-2015 – bar any extraordinary event that could delay the process – , it takes four to five years for these investors’ assets to regain their 2007 levels. Unless the appetite for investments in hedge funds increases a good deal, this delay will substantially curtail their fund-raising.

As for private-equity buyout funds, their assets under management fall in our base case, to $1 trillion by year end 2013. For starters, the collective wealth of their investors (like those of hedge funds) has declined sharply. Second, this scenario assumes that megadeals—leveraged buyouts worth more than $3 billion a piece, which dominated private equity during the boom—won’t revive anytime soon, because investors have less appetite for them, and banks working through credit losses face funding constraints. Meanwhile, private-equity managers are looking beyond buyouts, to other types of investments, such as distressed debt, infrastructure, real estate, and venture capital. We therefore project that total private-equity assets under management will grow modestly in our base case, to $3.4 trillion by year end 2013.

No one knows how the still prevailing financial and economic turmoil will play out, but our analysis shows that in virtually any scenario, the power brokers will remain a significant force in global capital markets. Oil exporters and Asian and Middle East sovereign investors will continue to be major players, controlling vast pools of wealth. Hedge funds and private-equity buyout funds are down but not out.

The evidence to date gives some reason for optimism that the risks these players pose are manageable. Nevertheless, the concerns being raised by the rise of the new power brokers are real and justify careful monitoring.

We at the Financial Policy Council suggest that the four players would be wise to note public concerns and voluntarily take steps to minimize them.

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