This morning's news regarding the Bush administration's proposed regulatory overhaul of the financial market has received some commentary so far here at dkos, and is being described elsewhere as a non-starter, but I thought it might make sense to address whether or not this new proposal--especially in light of Obama's excellent speech last week on the economy--makes the current situation better or worse.
Like most people here, I am highly dubious about a plan from an administration that tends to favor Wall Street elites and corporations over Main Street and middle class individuals. So, is this new plan a case of the fox guarding the henhouse, or is it a case of too little too late, and what should the Democratic response (particularly Obama's) to this plan be?
Here are some of the stories thus far on the plan:
Paulson proposes financial overhaul
By MARTIN CRUTSINGER, AP Economics Writer
1 hour, 9 minutes ago
WASHINGTON - The Bush administration Monday proposed the most far-ranging overhaul of the financial regulatory system since the stock market crash of 1929 and the ensuing Great Depression.
The plan would change how the government regulates thousands of businesses from the nation's biggest banks and investment houses down to the local insurance agent and mortgage broker.
Treasury Secretary Henry Paulson unveiled the 218-page plan in a speech in Treasury's ornate Cash Room. He declared that a strong financial system was important not just for Wall Street but also for working Americans.
(note: perhaps the treasury's "ornate Cash Room" was not the best place from a PR perspective to unveil this plan?)
By MICHAEL M. GRYNBAUM, New York Times
Published: March 31, 2008
The Bush administration on Monday rolled out the broadest overhaul of Wall Street regulation since the Great Depression, presenting a series of proposals that would, for the first time, create a set of federal regulators with authority over all players in the financial system.
But the proposal will do almost nothing to regulate the alphabet soup of sophisticated financial products that have fueled the current financial crisis. And it will not rein in practices that have been linked to the mortgage crisis, like packaging risky loans into securities carrying the highest ratings.
Hedge funds and private equity firms, which have enjoyed freedom from government oversight for years, would finally fall under federal watch. But that oversight would be minimal, enabling the government to do little beyond collecting information until a widescale financial crisis has already occurred.
(note: the Times article above also has a link to the full text of Paulson's speech)
Why The Paulson Plan Is DOA
Business Week | Michael Mandel | March 30, 2008 05:04 PM
Let's see. In the middle of perhaps the greatest financial upheaval since the Great Depression, Treasury Secretary Hank Paulson is proposing a change in financial regulations which basically amounts to a big wink to Wall Street. His plan will go nowhere, both for political and practical reasons. In fact, it does not even meet the minimum standard of improving transparency, which would reduce the possibility of a similar crisis in the future.
Should the plan be dismissed out of hand, or are parts of it worth considering and/or integrating into another plan? So far the NYT and some of the business commenatry linked to above is already suggesting that the plan is perhaps woefully deficient, does not address the core problems that led to the current fiscal crisis, and furthermore may have little chance of making its way into legislation before Bush's term ends. So was the plan just to placate investors and the market, or is there any substance here that might be salvaged if a Democrat becomes our next president? Discuss.