President Barack Obama should scrap all plans to roll out any new regulations until unemployment rates drop to around 4.5 percent, says real estate magnate Sam Zell.
Look at the MF Global collapse as an example, Zell says.
It fell in wake of the passage of the Dodd-Frank financial reform law as well as Sarbanes-Oxley and other regulations designed to prevent disruptions and irregularities in the financial system from threatening average Americans.
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Tax hikes, meanwhile, won't help the economy either, because even though they generate fresh government revenue, they zap confidence and business activity.
(Associated Press photo)
"When it's all said and done, it's very hard for me to see how raising taxes can change anything. Raising taxes may generate more revenue but every time you raise taxes, you create further disincentives. We've already got too many disincentives in our system," Zell tells CNBC.
"If we want to generate growth, effectively President Obama should announce that all regulation is being postponed until we have 4.5 percent unemployment, at which point maybe we can afford the kind of gold-plated ideas that are coming out of the regulatory agencies. That's the reality."
Unemployment rates currently stand around 9.1 percent
Reports are swirling that MF Global, the financial services firm that recently went bankrupt, failed to separate client money from its own when making investments in commodities.
"We did not need Sarbanes-Oxley if we had enforced the existing regulations. We did not need Dodd-Frank is we had enforced the existing regulations. Effectively, after we have all of those things, how does something like MF Global go broke? They go broke because we have regulators, but they are all sitting in Washington trying to devise how to destroy the economy rather than enforce the rules that have been written," Zell says.
"Basically the regulatory agencies to a large extent have scared the hell out of the business community.
While enforcing existing regulations could help prevent such collapses, the same belief hold true for narrowing government deficits: don't raise taxes just simplify the tax code.
Scaring businesses with new regulations and with new taxes won't lead to growth and prosperity.
"I think that effectively they can raise taxes by 're-jiggering' the IRS code. In other words, you clean up and simplify the code and effectively, you'll raise revenue."
MF Global clients, meanwhile, are fuming.
Unable to access their accounts, many of which have been frozen, clients seeking to trade on exchanges are left wondering what's next.
"I am aggravated and upset.... I feel fairly confident my customers will be made whole. The question is how long the feds will tie the funds up so they can't be used," says Joe Ocrant, president of livestock-focused fund Oak Investment Group, according to Reuters.
A total of 150,000 customer accounts were frozen on Oct. 31, the newswire reports.
Some experts say the MF Global collapse won't disrupt the financial system like Lehman Brothers did back in 2008.
Yet since the firm was involved in a number of markets, regulators can gain insights into how to react to a larger firm failing.
"This is spring training," says Brian Gardner, an analyst with Keefe, Bruyette & Woods, according to Reuters.
"This is the game that doesn't count but they get to watch it happen and they can kind of war game their rules."
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