After JPMorgan’s $2 billion loss that’s likely related to the London whale (love that nickname), Jamie Dimon’s rants against the evils of  Wall Street regulation and the Volcker rule look shakier than ever. Now i’m not usually one for heavy regulation- I do think governments hardly have the expertise to tell businesses/banks how to run themselves, but at the same time, the size of the finance industry in today’s day and age is getting somewhat out of hand.

To put things into perspective, research done by a NYU finance economist showed that even though the internet age has brought leaps and bounds in financial technology and innovation, the costs of have actually increased more than the benefits, implying that the finance sector today is actually more inefficient than a century ago.

Phillippon, the economist, takes into account the output of finance e.g. matching savers with borrowers, pooling risks, and producing information through price changes, and the costs, total compensation for providing such services. He then estimated the unit cost of the financial middleman, which was 1.3 percent of all financial assets percent in the early 1900s and amounts to some 2.3 percent currently, with much of the rise having occurred since the 1970s.

Now i know it’s just one research paper by an academic, but if the way he’s calculated the costs and benefits is reliable, then this really an interesting bit of information to consider when weighing the pros and cons of regulating Wall Street.

The Business Week story has more details.


GiveForward is a social entrepreneurial start up based in Chicago. Reading about their business idea might cause you to smack your forehead, as it makes you wonder “now why didn’t i think of that earlier?!” But the best ideas around are often one of the simplest, and those that are often just staring at you in the eye.

Basically it’s a tool that taps on social networking sites, like facebook, to help people raise funds for their causes, or for things like medical expenses- so you could set up a page to raise funds for your family/friends/even pets that are sick, going through some hefty medical procedure etc. It’s quite the awesome tool, especially if you think about the fact that medical costs cause 60 percent of all personal bankruptcies in America. Most of us probably know or heard of someone who’s in real need of money to help tide through medical fees, especially when it’s the result of unforeseen circumstances.

GiveForward makes it easier, by allowing you and your friends, family, friends of friends etc to spread the word and raise funds at a much faster pace. The Chicago Tribune called it the “future of medical fundraising in the Internet Age.” According to Wiki, in March 2009, two sisters used GiveForward to raise $32,000 to pay for one sister’s kidney transplant. That’s pretty amazing.

So if you like the sound of the idea, pay it forward by letting others know about this service.