I have been reviewing Treasury's Framework for Regulatory Reform and have reviewed several articles about the reforms. In my opinion, something is missing. Some of the proposals offered are good such as increased oversight of the OTC derivatives market or requiring hedge funds over a certain size to register. These proposals should help.
However, no where in the Framework does it say that financial conglomerates were too big and must be made smaller. The proposal for a systemic risk monitor/regulator is troubling because why add another regulatory body to the current web of regulators. What is needed is hard rules, better yet Federal laws, not another regulatory body.
Yes, hard rules/Federal laws such as the late Glass-Steagall Act. Hard rules/Federal laws that prohibit bank holding companies from being the one-stop shop for everything under the sun and are capable of conducting a "shadow banking" system. It seems we never learn from history - especially extremely recent history. "Too big to fail" is bad.
There is nothing in the framework that prohibits "too big to fail". The framework calls for monitoring or "regulating" financial conglomerates. However, what happens if the new systemic risk regulator is a sleep at the wheel and misses the signs of financial conglomerates becoming too risky? We know this is possible. How about this systemic risk regulator is led by someone who despises regulation or whose perceptions of risk are much different than normal? We know this is possible.
I agree with Nassim Taleb when he said in an CNBC interview (it is posted somewhere on EP) that a complex global financial system needs robustness and not fragility. A robust system is created by smaller institutions and more competition. This is definitely contrary to those who argue that we need to preserve "too big" financial conglomerates because they are more efficient. But I missed how they are more efficient especially considering our current economic situation.
Here is legislation you want to review
This is the House Financial Services bill that would give the Treasury massive new powers to seize "non-financial" institutions which pose "systemic risk".
I've been trying to get to a blog post on this but it looks like you're really digging around at this point, so getting more eyeballs on the actual bills in committee is where we need to go hunting around...
before they pass. I think this one is on "fast track" but I don't think it's been voted out of committee....yet.
I don't have the legislation number to track it yet in thomas.gov.
I frankly don't want Geithner involved in pretty much anything at this point. I also mull past Treasury secretaries and I find the idea of giving them even more power absolutely scary.
I will definitely review it. This is truly indicative of ideology and it is not a matter of right vs. left. It is more those who believe in "free markets" and those who are skeptical of "free markets".
RebelCapitalist.com - Financial Information for the Rest of Us.
not even that to me
to me this is "stupid" and "not stupid" and "insider favoritism" dedicated by the very financial executives and "shareholders" who stand to make or loss a butt load of money and little else.
Seriously, a lot of these policies look like CFO recommendations on how to get out of this, continue to exist, get those bonuses back and continue to create fictional money.
Wouldn't it be awesome if we had internal memos from places like Goldman Sachs, JP Morgan Chase and China to see if that's where a lot of this policy is really coming from?
The only real problem with a free market
Is that freedom, by definition, is disconnected from morality.
Executive compensation is inversely proportional to morality and ethics.
Maximum jobs, not maximum profits.