Geithner Is Overreaching on Regulatory Power

Discussion in 'Politics' started by ScreamingEagle, Mar 29, 2009.

  1. ScreamingEagle
    Offline

    ScreamingEagle Gold Member

    Joined:
    Jul 5, 2004
    Messages:
    12,887
    Thanks Received:
    1,610
    Trophy Points:
    245
    Ratings:
    +2,159
    One of the main proposals in the regulatory reforms outlined by Treasury Secretary Timothy Geithner yesterday would give the Treasury, FDIC and the Fed authority to take control when investment banks or other financial institutions (hedge funds, etc.) appear troubled, just as the FDIC presently does with deposit-taking banks.

    The proposal is being offered as a clever political solution to the turf war that might have erupted if the Treasury or FDIC alone were given this quasi-nationalization authority, with no input from the Fed. But the real issue is whether this expansion of regulators' powers is wise. It isn't.

    Start with the FDIC's performance in practice. One would suspect that the government might not be a shrewd player in the banking business, and recent events confirm that suspicion. IndyMac, for example, was not taken over by the FDIC until long after it was obvious that it should be closed, and current estimates of the cost to taxpayers approach $10 billion. Shortly after the IndyMac failure, moreover, the FDIC brokered a deal to sell Wachovia to Citigroup at a lowball price and wound up with egg on its face when Wells Fargo emerged with a vastly superior offer. We could continue.

    There's also significant room for principled skepticism based on economics and law. Indeed, the case for broadening regulators' oversight to include investment banks and other financial institutions is based on three flawed assumptions.

    The first is that the same factors that justify expansive powers to close banks and take control of their assets are equally applicable to investment banks and other financial institutions.
    ....
    The second flawed assumption is that our bankruptcy laws are not adequate for handling defaults by investment banks or other financial institutions.
    ....
    The third flawed assumption is that financial firms flirting with distress are somehow worse decision makers than federal regulators.


    Diebold and Skeel Say Timothy Geithner Is Overextending the Regulatory Power of the Fed, Treasury and FDIC - WSJ.com
     
  2. waltky
    Online

    waltky Wise ol' monkey Supporting Member

    Joined:
    Feb 6, 2011
    Messages:
    20,866
    Thanks Received:
    1,791
    Trophy Points:
    215
    Location:
    Okolona, KY
    Ratings:
    +3,881
    "We're from the gov't -we're here to help you...
    :eusa_eh:
    Bernanke Says Bank Overhaul Will Help Small Banks
    Wednesday, March 23, 2011 Washington (AP) - Federal Reserve Chairman Ben Bernanke told a group of small-bank executives on Wednesday that the financial overhaul will benefit their institutions because it will level the playing field with the industry's giants.
     
  3. jgarden
    Offline

    jgarden Senior Member

    Joined:
    Sep 3, 2010
    Messages:
    1,459
    Thanks Received:
    200
    Trophy Points:
    48
    Ratings:
    +201
    One would think that by sharing a common border with the country that is recognozed as having the best banking system in the world, the US would at least be taking a long, hard look at what features they could adapt to their own system!
     
    Last edited: Mar 24, 2011
  4. gekaap
    Offline

    gekaap BANNED

    Joined:
    Jan 25, 2011
    Messages:
    1,795
    Thanks Received:
    135
    Trophy Points:
    0
    Ratings:
    +135
    So, explain WHY these are flawed assumptions.
     
  5. Mad Scientist
    Offline

    Mad Scientist Deplorable Gold Supporting Member Supporting Member

    Joined:
    Sep 15, 2008
    Messages:
    23,940
    Thanks Received:
    5,212
    Trophy Points:
    270
    Ratings:
    +7,683
    That will never happen as it takes power away from the Private Federal Reserve Bank.
     

Share This Page