A story on the Mises Institute site has it that the regulators in the US are now worried about soft dollars, and are looking to close down on the practice.
The story makes some good points - such as soft dollars having been accepted for decades, and even condoned in the law. Now they are bad and unacceptable and must be stopped.
Soft dollars, by the way, are a fascinating internal currency used between insiders in wall street and other trading worlds. They are a self-issued currency, handed out as kickbacks by suppliers, and taken back in exchange for some other mild services. The classical path is for a pension to be paid soft dollars in exchange for passing a trade through a bank. Then, the pension purchases research from the bank, paying with soft dollars.
Whether that's a transfer pricing scheme, as some would have it, or an internal market currency, like our PSD, or a rort designed to rape the unprotected public, depends on many factors. What is clear is that they evolved through pressures in the market place, and probably have their place. But, like anything, they can be abused.
Instead of fixating on the tabloid libertarian rhetoric, it would have been more useful to speculate on why this is all going on. One clue - the ICI, deep in the midst of crisis from the mutual funds scandal - is asking for the bad stuff to be stopped. How convenient.
Posted by iang at February 18, 2004 11:46 AM | TrackBack