I (along with many others) believe that the housing crisis was brought on, in large part, by poor policies and planning on the part of Alan Greenspan and the Federal Reserve. So who does the Treasury Department feel is best qualified to take over crisis management? You guessed it– the Fed:
WASHINGTON (Reuters) - The U.S. Treasury Department will propose on Monday that the Federal Reserve be given sweeping new powers that would make it chief regulator with authority to take actions to ensure market stability.
The proposals say a "market stability regulator" is needed and the Fed best fits that role, suggesting the central bank could use its control over interest rates as well as its ability to provide market liquidity to fulfill its functions.
It proposes that the Fed be given broad authority to require information from all participants in financial markets and a right to collaborate with other regulators in writing the rules that companies and institutions must follow.
NEW FED POWERS
If the Fed finds that the actions of some market participants pose risks for the overall financial system or the economy, "the Federal Reserve should have authority to require corrective action to address current risks or to constrain future risk-taking," the summary said.
Among other recommendations, Treasury suggests merging the Securities and Exchange Commission, the U.S. markets watchdog, with the Commodity Futures Trading Commission that oversees the activities of the futures market.
It also recommends getting rid of a Depression-era charter for thrifts that was intended to make it easier to obtain mortgage loans, saying it is no longer necessary. That would mean closing up the Office of Thrift Supervision and transferring its duties to the Office of the Comptroller of the Currency that oversees national banks.
The chairman of the House Financial Services Committee, Democratic Rep. Barney Frank, last week said Congress should seriously consider giving a federal agency the power to monitor all risk in the financial system and act when necessary, regardless of its corporate form.
Frank suggested one possibility would be to empower the fed as "Financial Services Risk Regulator," an idea that Treasury’s proposals appear to broadly embrace.
While clearly the present patchwork of regulations and regulators are in need of revamping, I, for one, am against making the "risk perpetrator" the "risk regulator". The Fed has already shown it’s preference for Wall Street over Main Street. Do we really believe that they will operate with the interest of all of us at heart?
Frank suggested one possibility would be to empower the fed as “Financial Services Risk Regulator”
Wow Barney, great idea! And only 6 years too late. Don’t chase the horses, just close the door.
Holy Hand Grendade, Batman!
I go away for a couple of days, and this happens.
Well, gotta read the except to figure out what it means. It just can’t be good.
Yossarian-
The more I read about it, the less I like it. I’m all for regulation that mandates integrity and transparency- those things are necessary for a free market economy to work. This smacks of a centrally planned economy though- the WSJ is likening the Fed’s roll in the new order as a SWAT team to stamp out risk.
L asks “If they didn’t have the brains and foresight to see this coming, what qualifies them to fix it now?”
I agree.
Barney Frank is a JOKE! In any other State in America this guy wouldn’t even get elected Dog Catcher!
The systemic risk regulatory powers are just window dressing here. The real meat of this bill is yet another attempt to drive a stake into the heart of the thrift charter by folding OTS into OCC, bulking up OCC so they can then continue their holy war against the Fed to see who the “top” regulator will be.
If you really want to change things for the better in the regulatory world let the OTS/OCC merger occur, repeal HOLA, then amend the National Bank Act to require OCC charters to abide by state law. I’m sick & tired of OTS/OCC lenders having the ability not to abide by my home state’s absolute prohibition on prepayment penalties, the absolute requirement for a pre-closing commitment letter, and our version of HOEPA (but with much tighter triggers).