I responded over at Forbes today on this topic and thought I should edit a little and bring those comments over here because it’s
important and it’s the true reality as the banks would get 5 years to move things around. What does that leave consumers, 5 more fun packed years of models with banks creating additional profits as the proposed rules would give them that long to separate the brokering from the functional banks. A lot of code can be written in that amount of time while they work on moving investments and consumer accounts around, banks multi task well. Today over at Zero Hedge..the next thing to come with private equity firms is taking away employee 401k plans and giving them low valued company stock? A good example with KKR cited.
It was in the news today that they are working on trying to make mobile banking even more profitable. Here’s a link with a great video that explains how some of this works, modeling for inequality using segmentation, i.e. “weapons of math destruction” as her lecture series goes. She worked and did her job with complex math formulas calculating risk and did they use them..not hardly…they wanted the charts with red and blue bars. Now anyone with mathematician talent will laugh at that one as it’s talent wasted and I would fee; that way too even as a developer. They had her in a job to legally cover their back side for compliance reasons and used what ever model made money it sounds like. Bill Gates today in a video I blogged also talked extensively about modeling.
Modeling for Inequality With Segmentation, Insurance Industry Uses Backwards Segmentation As Some Models Stand to Threaten Overall Democracy
I respect Elizabeth Warren but I sure wish she would kick
it up a level for sure. We have the system ass backwards if you want any kind of regulation to really take place, the lawyers doing what they do best, research and litigation should be backing up technologists and Quants “who know” what is going on and not running the place. This is a big problem as their professions takes years to resolve things and we don’t have that time now. We have the same thing going on with health insurers. If you think the health insurance business is only about paying claims and collecting policy payments, well you better look again as all the action takes place in the multiple tiered subsidiaries that you have never heard of or don’t realize they own. My mother just passed away recently and boy I’m sure glad I looked and didn’t use a for profit hospice service as gosh knows what all the analytics and negotiating for her pain medication would have been by the time I got out of there with dealing with them, it’s how the insurers work.
Hospice In the “For Profit” Sector As Subsidiaries of Health Insurance Companies-Subsidiary Watch
We have a shortage of data sleuths, the ones who know what is going on with the other side with the exception of the NSA in government. Then add on Richard Cordray, who is an attorney, who has announced he’s now building a data base to study how we interact with financial software…geez…hire quants who have been there done that and learn up quickly, see what I mean about “slow lawyers” searching out “low tech” solutions, he’s another one. Being yet another lawyer I did question his knowledge when he was appointed so I guess the choice is to fill the job with a lawyer and have a body in there versus the talent we need.
Richard Cordray, Fail With Understanding Flawed Models and Algorithms -Big Case of“Algo Duping”With Big Data-Save Time, Hire Quants Who Know How Consumer Financial Models Are Built and Function…Geez
SEC, same problem, yet another lawyer dealing with litigation and research while the algos run circles around her, sad. She has tech folks helping her but again should be the other way around. Nothing personal folks but again she would make a great legal person to back up a technologist that knows how to go after the dirty models and ask banks to justify what kind of math they are running. Again the Quants video above will give you a good view of how some of that works. If you want to see more videos, visit the AlgoDuping page and there’s additional videos that I collected along with a few links that also add some context and content. Again, sad we can’t seem to muster up more than a “low tech” partial solution for an industry that relies on “high tech” models to make money and they get 5 more years of creative modeling time to boot. BD
Here’s the original comment over at Forbes.
On this post: Elizabeth Warren Hits Big Banks Where It Hurts, New Bill Would Restore Glass-Steagall
This would certainly do some good with protecting consumer accounts and is a "low tech" solution that most in Congress can understand. As all mentioned this would not have stopped the meltdown and I agree. We have digital duds sadly in DC and getting anything relative to technology is difficult, let alone perhaps restoring the office of technology assessment so they can educate themselves better and make better laws. Long and short of it is that the corruption is being run by math models and until those come out of their bliss worlds to acknowledge this exists, we get nowhere and are entertained by huge showings of digital illiteracy every time women's
health is discussed and the relationship of these discussions are getting linked more and more to lack of digital awareness. All the folks with any real modeling and data experience seem to end up at the NSA and we mostly duds in other departments, and one running the SEC right now..an attorney...a waste when a technologist is needed as that's what's being battled.
Appoint a technologist running the SEC up with a full staff to advise legally but we have it backwards now. So Elizabeth Warren is making an inroad with the "low tech" solution which will help but it doesn't attack the over all problem. There's a documentary and I keep telling all about it called "Quants, the Alchemists of Wall Street" watch it as even the layman can understand a mathematician at a blackboard writing formulas..and further more hearing him say "we will just use 6" as the folks writing the formulas themselves are lost..good stuff.
We place too much faith in economists today and I agree with Paul Wilmott in the video as they don't have real laws as you compare it to real physics and what are they using to create the formulas on the street..physicists..got it? (You can always find this video and 3 more that are done by people smarter than me that will help educate you on the processes if you want to spend the time watching.
So while the Warren action is in the right direction, it won't get to the root of the problem and we need folks that understand digitally created models that move money and basically lie with the models.
Banks and insurance companies have just morphed into big software companies anyway that control a huge chunk of the money, some of it money we consumers used to have access to, but no more so the "low tech" process I guess it is until we get digitally educated lawmakers that are not all lawyers, they are killing us.
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