Can we spare change?

Bermuda reached it’s peak when insurance was still in it’s infancy.  A time when Bermuda was filled with startups flush with cash.  Today, the industry is saturated and many of the now dominant firms spend far more time worrying about cutting costs.   Bermuda needs to capitalize on it’s advantages close to home and realize that there’s a burgeoning new industry, flush with capital ready to return us to prosperity.  Bermuda can and should be taking a closer look at what’s happening in the investment industry and recognize how incredibly well placed we are to benefit.  We cut our teeth by embracing on the high risk high reward prospects of reinsuring the insurance industry and could do the same with finance.

The Volcker rule has created a new battlefield over Wall Street pay that banks fear will send their star traders and hedge fund advisers fleeing.

The roughly 300-page proposal that was released earlier this month is fuzzy at best, but it makes clear that banks cannot pay their in-house top talent any type of bonuses that could encourage proprietary trading.

However, it is sending chills through banks who fear they may lose key talent.

Wall Street has reason to worry. High-profile traders have already left firms like Goldman Sachs and Morgan Stanley to escape the ban on proprietary trading by banks which was mandated by the 2010 Dodd-Frank financial oversight law.

As an IB exec recently pointed out, Bermuda is tremendously well placed to capitalize on the coming flood of investment startups due to appear as a result of the Volcker Rule.  To those unfamiliar with the rule, it prohibits banks from substantially owning or investing in hedge and private equity funds.  This means many top stars of the investment world will have little choice to branch out and start up their own.   Bermuda is incredibly well placed to provide a better alternative for those funds and their associated businesses to be located.  Where else can you enjoy the freedom of relaxed yet strong regulatory framework?  Where else can you show up less than an hour for your flight and be in NY in a couple hours and London by morning?  Where else can you enjoy a near non-existent commute and actually have the freedom to actually do something with your evening? 

Embracing and supporting risk has been our core strength, one we could leverage again.  Bermuda could be an excellent place to house cash flush new startups, eager to bring in top talent, spend money locally and revive our economy back to what it once was.  We should be doing everything we can to convince star traders that Bermuda is the ideal home for their business… and their money.

A Greek lesson for Bermuda?

Are there lessons to be learned in the Greek crisis for Bermuda, should we continue our trend towards financial insolvency?  Greek Prime Minister Papandreou’s call for a referendum on the country’s bailout package could be a brilliant political move, if he’s allowed to make it. 

The rest of the world may be appalled at the prospect of putting the decision to the people but let’s remember, the last bailout and debt forgiveness didn’t exactly work all that well, did it?  Why then is more of the same medicine likely to fair much better?  Will it ultimately be rejected by the Greek people and lead to even more rioting in the streets and mass unproductivity? 

Are there alternatives?  One potential solution then is to involve the people in the decision in order to quell discontent.  By letting the people own the decision, it becomes far harder for them to rally and protest against it for it wasn’t rammed down their throats but was made of their own accord.  The trick for Papandreou to achieve success is to carefully phrase the question for the people to answer.