Shocking...either Obama's really weak or being controlled:
The White House is giving up on any real institutional restructuring in its regulatory reform proposals. Instead, sources within the administration say the effort will focus on convincing Congress to tighten up the rules, and eliminate the gaps.
Well, this is discouraging, though not surprising. Institutional overlap, bureaucratic divergences, a rat's maze of offices and rules has long been symptomatic of the reality that we had a festering regulatory problem. Some basic restructuring of regulatory bureaucracies has long been seen as a precursor to more fundamental and more difficult issues. Now we seem to be skipping that restructuring because it's too difficult politically. From a pure budgetary standpoint, it's also crazy to have four bank regulators when the industry has converged enough to require one. And what is the logic of splitting derivatives regulation between the Securities and Exchange Commission and the Commodities Futures Trading Commission? Does anyone really believe outside Congress that complex issues underlying derivatives really have anything to do with pork bellies and corn futures?
Convergence and consolidation are really at the heart of this. In the Washington dream world, thrifts are very different from bank holding companies, which are very different from investment banks or insurers. In the real world, we have seen these once varied institutional life forms become more alike than different; probably the greatest differences between them stem from varying levels of regulatory disclosure and rules. But underneath all of them -- for good or bad -- there's a single engine: the markets, which are intimately interrelated and global. Banks offload loans into credit markets; insurers like AIG deal in credit default swaps; thrifts and banks sell mortgages and ship them upstream to investment banks; Goldman, Sachs & Co. (NYSE:GS) and Morgan Stanley (NYSE:MS) can morph from investment banks to commercial bank holding companies overnight and go on their way.
Does it have to be this way? Well, no -- but there's a price to be paid in the availability of liquidity and credit if we turn back the clock and try to carve up institutions functionally to emphasize their differences or (much dumber) match them to their traditional regulators and essentially freeze their operations. In short, we would be safer, if perhaps poorer. One of the interesting pieces of evidence to suggest we are not heading in that direction is that no one in the White House or Congress has murmured the phrase Glass-Steagall since Paul Volcker discussed it at a conference early in the year. Volcker has gone silent and so has the idea that financial institutions should be driven by diverse functions, trade-offs and rules; that a sort of heterogeneity and specialization should prevail. So from a pragmatic standpoint, the administration seems to have decided that the underlying market monoculture of finance (and, by extension, the continuation of too-big-to-fail institutions) should remain essentially intact, hedged perhaps with greater transparency and rules.
yet another symptom of a government that has gotten way to big. It is impossible for anyone to thoroughly know what the hell is going on. no one voting on the laws has time to read them. they often get introduced so fast that they aren't properly written or have little regard with regard to the ultimate application. just fix the one little problem, we'll clean up whatever unintended consequences there are with a later law. Never mind the poor saps that get caught up in them in the meantime. It's time to bring gov't back to the basics. that means both sides of the aisle fo sho.
Can I borrow your towel? My car just hit a water buffalo.
Great Op-ed in the Sunday Times...everyone should read the entire thing:
The storm is not over, not by a long shot. Huge structural flaws remain in the architecture of our financial system, and many of the fixes that the Obama administration has proposed will do little to address them and may make them worse. At another fund-raising event, for Senator Harry Reid, President Obama said: “We didn’t ask for the challenges that we face. But we are determined to answer the call to meet those challenges, to cast aside the old arguments and overcome the stubborn divisions and move forward as one people and one nation .... It will take time but I promise you, I promise you, I’ll always tell you the truth about the challenges we face.”
Keeping that statement in mind — as well as an abiding faith in the importance of properly functioning capital markets — we have come up with a set of questions meant to challenge a popular president, with vast majorities in Congress, to find the flaws in the system, to figure out what’s being done to fix them and to get to the truth about the difficulties we face as we set out to restore the proper functioning of our markets and our standing in the world.
•
Six months ago, nobody believed that our banking system was well designed, functioning smoothly or properly regulated — so why then are we so desperately anxious to restore that model as the status quo? Nearly every new program emanating these days from the Treasury Department — the Term Asset-Backed Securities Loan Facility, the Public Private Investment Program, the “stress tests” of major banks — appears to have been designed to either paper over or to prop up a system that has clearly failed.
Instead of hauling out the new drywall to cover up the existing studs, let’s seriously consider ripping down the entire structure, dynamiting the foundation and building a new system that rewards taking prudent risks, allocates capital where it is needed, allows all investors to get accurate and timely financial information and increases value to shareholders and creditors.
“We didn’t ask for the challenges that we face. But we are determined to answer the call to meet those challenges, to cast aside the old arguments and overcome the stubborn divisions and move forward as one people and one nation .... It will take time but I promise you, I promise you, I’ll always tell you the truth about the challenges we face.”
Didn't ask for these challenges?? Say MF'n WHAT?! He asked to be elected, therefore he DID directly ask for these challenges. That's like saying "I didn't want the STD, but I asked to have unprotected sex with you." You asked to be elected, you own it now!
Can I borrow your towel? My car just hit a water buffalo.