They're going to create new regulations for the banking industry.
They're going to regulate finance and lending.
CNN says this is the biggest overhaul of Financial regulation since the depression. That makes me very worried.
Is there an iota of a reason why we the people should trust Bush and Paulson?
Trust them to do a competent job?
Trust them to base their actions on sound criteria that will protect consumer, as compared to corporate interests?
Trust them to actually increase regulations that protect instead of working under the chimera of cleaning things up, while actually weakening protections and helping big corporations.
Get my drift? There is zero reason to trust Bush or former Goldman Sachs CEO Henry Paulson to do what is good for the average American, even what is good for the general US economy.
Let's start with another bit of news today. TalkingPointsMemo reports, HUD Chief Reign of Cronyism Ends. Another Bush appointee, unanimously approved by congress, by the way, who got caught. Another tip of the Bush appointee iceberg.
There are plenty of reasons to suspect that the 200+ page document which describes the plan is loaded with malignant changes that will hurt consumers, hurt the economy, hurt America... but help friends of Bushco.
For example, one move of Paulson's changes includes consolidating agencies. Does this eliminate oversight possibilities? Does this eliminate appointees who must be approved by congress? Does this allow more partisan appointments?
The federal reserve is not a government entity. The federal reserve was directly involved in the decisions which led to the current mess. What the hell is Paulson doing giving it more regulatory powers? Instead, the Fed should be stripped of powers. If any new agencies are created, they should be government agencies and the heads should be confirmed by congress. joetalirco writes about this more in his dkos diary Beware of Paulson Plan for "Regulation
At this point, Harry Reid, Nancy Pelosi and all relevant committee heads in both houses of congress should be calling their appropriate staffers back from vacation and having them scrutinize every word of Paulson's plan.
It is highly likely that Bush will present this plan as a presidential directive or something like it-- that the people of the US will just have to accept. No ****ing way. Congress should have to decide something as important as this. It is essential that regardless of the power that Bush and his rubberstamp right wing members of congress claim, that this be stopped dead.
It is essential that new rules and regulations be put in place, probably important for new agencies be created and possibly re-organization occur-- but it is downright insane for the Dems to allow Bush to just submit the plan and accept it.
The NY Times reports on this development. I cite some remarks in the article:
As the full effect of the credit crisis becomes clearer, the political stakes are growing.
Mr. Paulson is clearly taking a stand against critics who support even stricter regulations, while rejecting any notion that the crisis in financial markets or the collapse of Bear Stearns can be laid at the administration’s doorstep. In a draft of a speech to be delivered Monday, he declares: "I do not believe it is fair or accurate to blame our regulatory structure for the current turmoil."
And while he argues that the current regulatory structure is outdated, Mr. Paulson’s vision for the future echoes the traditional Republican view that new rules and agencies are no substitute for market discipline.
Perhaps it's good news that the new powers given to the Fed are very limited, but it also seems that they are then, more for show, and are wielded by non-government, non-legislator approved people. Danny Schechter, at Mediachannel.org, writes, in his article, Fed Up: Foxes Charged With Guarding Financial Coop
...despite its obsession with surges and bombing Iraq back to its idea of "normalcy," the White House says it now feels our pain and has decided to act. Well, at least, to let former Goldman Sachs CEO Hank Paulson, now our Treasury Secretary, (in the tradition of former Goldman Sachs exec Robert Rubin who followed the same career path) impose yet another new pacification plan.
Paulson has studied the crisis, studied it deeply, and realized the culpability of the brokers and the banks in engineering the disaster. His solution: kick the ball over to The Federal Reserve Bank. He’s enlisting the Fed foxes to guard a Wall Street chicken coop at risk from a dangerous form of bird flu. (The technical term is ‘greeditis" enabled by regulatory arthritis.)
He knows that most Americans — and most of the media — think the Fed is a neutral government agency with a public interest mandate. They think it has the expertise and the power to swoop down and save us from our misery, despite the fact that eights months of rate cuts and capital "injections" have failed to stem the contagion of collapse.
The NY Times writes:
But the Fed would not be able to act simply because one bank or brokerage house was taking excessive risk. Instead, the Fed’s "authority to require correction actions should be limited to instances where overall financial market stability was threatened," the proposal states.
The Fed has long had great prestige in Washington, but in the current crisis it has seen its decisions challenged from both the left and the right.
"The Fed oversaw this meltdown," said Michael Greenberger, a law professor at the University of Maryland who was a senior official of the Commodity Futures Trading Commission during the Clinton administration. "This is the equivalent of the builders of the Maginot line giving lessons on defense."
The Fed’s former chairman, Alan Greenspan, for years praised the growth in the derivatives market as a boon for market stability, and resisted calls to use the Fed’s power to increase regulation of the mortgage market.
On the right, some were appalled by the decision by federal regulators to intervene to keep Bear Stearns from collapsing. "I want market discipline, too, but you don’t do it by empowering the Fed," said Representative Scott Garrett of New Jersey, a Republican on the House Financial Services Committee. "We’re trying to get transparency for the market from an institution that’s not transparent in its own workings."
Under the Treasury proposal, while the Fed would have some authority to stop financial institutions from taking on too much risk through the use of exotic financial instruments, it appears that little would be done to limit the flow of such new products.
The Treasury says that it and other federal regulators still believe a principle it enunciated a year ago, "that market discipline is the most effective tool to limit systemic risk."
That discipline was largely lacking when the problems were being created, but now has returned with a vengeance, leaving banks with securities of dubious value that cannot be sold at any price that even approaches what they were thought to be worth only months ago.
Dems have to be cautious not to be duped. The Times reports,
Democrats reacted with some praise. "It’s a recognition, maybe a reluctant one, that you have to enhance regulation," said Rep. Barney Frank, a Massachusetts Democrat who is chairman of the House Financial Services committee.
Frank should know better. This is not enhancing regulation. There are no teeth to this proposal. It is impotent.
Here's an example of how Paulson's plan opens new doors and cuts regulations:
Arthur Levitt, a former chairman of the S.E.C., ...said he was concerned by proposals to expand the authority of self-regulatory organizations, like stock exchanges. As an interim step, Mr. Paulson proposed allowing those organizations to change their rules without seeking explicit approval from regulators.
"They have acted in their own self interest too often to allow them to get out from under the oversight process," Mr. Levitt said.
We should assume this is the tip of the iceberg in the 200 page document.
And we should assume that Bush has no intention to clean up this disastrous, mega-destructive mess, just as he has no intention to clean up the Iraq Occupation mess. Paulson is engaging in delay tactics, as the NY Times reports:
Mr. Paulson, in the speech to be delivered Monday, says the long-term proposals he is making should not be acted upon while the current market stresses remain severe. Instead, he says, no final decisions should be made "this month or even this year." Next year, of course, a new president will take office.
Here's what mediachannel's Schechter has to say on delay,
This is one more effort to appear to at least be doing something, as the blog Naked Capitalism explains:
"There is less here than meets the eye, and what is here is guaranteed not to be implemented during the remaining months of the Bush presidency. And that of course is precisely the point of this exercise. Appear to be doing something and dump the mess in the lap of your successor.
To the details—Remember where we are: we’ve had years of misguided confidence that investment banks could be left to their own devices, that the wonders of the originate-and-distribute model meant Things Were Different This Time. Specifically, the powers that be believed that risks were so widely spread and diversified that the financial system was now much more resistant to systemic shocks. We’ve seen what a crock that idea was."
It is just possible that Bush’s successor—Obama or Clinton—will see through this charade, although Hillary has already proposed a Blue Ribbon type commission with former Fed Chairman Alan Greenspan and others whose policies led to the crisis. (Her campaign manager Maggie Williams has now been linked to a defunct mortgage company making subprime loans.)
John McCain has not only admitted he knows nothing about economics, but has advisors whose free market theology seems to be to the right of Paulson and the Fed’s Ben Bernanke who some conservatives fear are already meddling too much in the economy. His key advisor, former Texas Senator Phil Gramm, a Democrat Turned Republican shilled for predatory lenders for years, even denouncing a housing activist as a "terrorist."
Obama also has a sub-prime link through his Finance Chairman Penny Pritzger who ran a Chicago bank that imploded and owes the government and depositors hundreds of millions. Nevertheless, economics writer Robert Kuttner feels Obama’s ideas, spelled out in a speech last week, are evolving in a progressive direction:
"The speech also showed real understanding and subtlety in grasping how financial ‘innovation’ had outrun regulation, as well as a historical sense of the abuses of the 1920s repeating themselves. Obama is one of the few mainstream leaders — Barney Frank is another — calling for capital requirements to be extended to every category of financial institution that creates credit. This is exactly what’s needed to prevent the next meltdown, but if it were put to a vote now, it would be rejected by legislators from both parties because they are still in thrall to market fundamentalism and Wall Street. That’s where presidential leadership comes in."
The only candidate challenging the Fed directly has been Congressman Ron Paul, who has been more of a maverick than McCain who loves that title.
We know that those who fail to remember history are doomed to repeat it. The Times article reports:
During the Great Depression, Congress forced the separation of the investment banking and commercial banking industries and set up different regulatory systems for each, which seemed appropriate since the government guaranteed deposits in commercial banks but provided no similar benefit for investment banks.
The wall between the two businesses eroded and was eventually taken down by Congress in the 1990s, and the Bear Stearns case indicates that, at least for some investment banks, the risk of a default is too great to allow.
But the Paulson proposal would not give regulators new powers over other investment banks. The proposed prudential regulator would not have authority, since there is no explicit guarantee of its liabilities, and the Fed would be expected to step in to limit risk taking only if the stability of the financial system were threatened.
The proposal also calls for an early merger of the S.E.C. and the Commodities Futures Trading Commission, reflecting the reality that the markets and products they regulate often overlap or compete with one another. The Treasury wants to assure a combined agency would adopt the gentler regulatory approach of the C.F.T.C., which has exempted from regulation many derivatives products that are traded over the counter. The plan also would eliminate the Office of Thrift Supervision, which now oversees savings institutions.
I don't trust this merger. I am certain that the result will lead to LESS regulation, less accountability.
Barney Frank should be VERY careful about this business. He runs a powerful committee and he better keep a very close eye on this. Trillions are riding on his ability to remain independent and tough. This is so big that I sure hope there are independent watchdog organizations looking over Franks shoulders. The temptation to give these huge financial operations with their many tentacles of lobbyist and other influence will be great. Frank could be a hero here or the next Duke Cunningham. I have not reason to suggest that he has currently done anything wrong, but I worry that he's already gone on the record with some positive feedback to Paulson, saying, "It’s a recognition, maybe a reluctant one, that you have to enhance regulation." Sorry congressman Frank, but it is merely the appearance of regulation.
Finally, it will be interesting to see if any of the mainstream media do anything more than stenographically report Paulson's plan. There should be plenty of questions.
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