March 26, 2009
Like The Old Saying Goes, When You’re A Hammer, Every Problem Looks Like It Needs To Be Heavily Regulated…
We created a list of the major sectors of the American economy and ranked them in the order of how heavily regulated they are by the government, from most to least:
2. Every Other Sector
Using the same economic sectors, we then ranked them in the order of how great a contribution they made to our current financial crisis, from most to least:
2. Every Other Sector
Notice anything similar?
Yeah, neither do we.
That is why we support the obvious need for more regulation of the financial sector.
To start things off, Timothy Geithner testified before the House Financial Services Committee this morning, unveiling the first component of his proposed regulatory reform which was aimed directly at what he believes is the issue in most immediate need of attention:
Systemic Risk refers to the grave damage that could be done to the entire nation’s complex interconnected system of campaign contributions were a single large firm to fail. From brokerage firms to banks to insurance companies, the very fabric of influence peddling could unravel in a very short time, creating a disaster that would be felt from one end of the country to the other, and by “country” we mean “K Street.”
Secretary Geithner’s plan to address systemic risk encompasses six specific proposals:
I. A Single Independent Regulator with responsibility over Systemically Important Firms and Critical Payment and Settlement Systems.
Naturally, this regulator must be independent, like the Federal Reserve which is so completely 100% independent that Federal Reserve Chairman Ben Bernanke went on 60 minutes to demonstrate just how independent of public opinion and political pressure he is.
Hey, it’s not like he went on The View.
II. Higher Standards on Capital and Risk Management for Systemically Important Firms:
III. Requiring All Hedge Funds Above A Certain Size to Register
IV. A Comprehensive Framework of Oversight, Protection and Disclosure for the OTC Derivatives Market:
Unfortunately, it’s difficult to achieve Treasury's goal of expanding the federal bureaucracy under such an approach. So instead, we'll create an army of GS-11s and GS-12s charged with trying to monitor a fast-moving, endlessly innovating market in financial derivatives.
It will probably work out fine.
V. New Requirements for Money Market Funds to Reduce the Risk of Rapid Withdrawals:
This simply cannot be allowed to continue, particularly since regulatory authorities have already demonstrated their oversight prowess with the banks.
VI. A Stronger Resolution Authority to Protect Against the Failure of Complex Institutions:
And yes, this is just the first component of Treasury’s plans. There are three more to come in the months ahead.
Just in case you were looking into Costa Rica.
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So when do we get to hear about how Congress allowed these companies to get to the point where they cannot fail? Wasn't that what antitrust laws were for? And what they are doing now is just making (forcing) Large companies buy out other companies and become even larger. Called takeovers. This makes me want to barf!
Posted by: barryjo | Mar 26, 2009 8:57:18 PM