Financial Regulation: What's the Point?
The ridiculous parade that has been financial regulation is best characterized as soundbite and headline heavy face, and a hollowed out body. After nearly crushing the US banking system major banks have been able to side step and serious regulatory changes and the FED has dodged any chance of ever seeing what they are doing. This is very disappointing.
There have been many instances of rules that could have made a difference making waves and then not two weeks later have the whole thing scrapped or changed to a bare bones kind of deal.
Best example: Senator Blanche Lincoln (D-Ak)
Senator Lincoln's hard stance on making the mega banks spin off derivatives desks makes sense. She barely won her primary mainly on her sticking to her guns on this issue to confront the banks on this. Of course, now she has won and the cave in begins:
Wall Street Set To Get Huge Win, As Blanche Lincoln Caving Towards A Derivatives Compromise
I want to say I am surprised but I do not like to lie to the readers. From the piece:
Senator Blanche Lincoln is on a hunt to take down derivatives, or more specifically radically alter the ability of bank holding companies to deal in them.And of course it does not stop there:
But now, in an effort to broker some kind of compromise between the U.S. government and the banks, Lincoln may amend her derivatives measure to allows banks two full years to spin off their swaps departments into subsidiaries or special purpose entities.
Here's the kicker though...I am going to make a bold prediction, write this one down: The banks will all say any changes will kill their small business and mortgage lending abilities! I know, I must be able to see the future or something.
Banks would be able to produce their own studies of how the proposed legislation would “impact of the measure on mortgage lending, small business lending, jobs and capital formation. In otherwords, if the studies suggested that everything would suck after this, they'd probably wiggle out of the new rules.
It does not stop there but The idea of the FED getting out of any serious audit, or never having any mechanism to end the too big to fail monsters makes me ill.
Whether it is Hurricane Katrina, the banking crisis, the mortgage crisis, the Gulf Oil Spill, or your local DMV the people in charge really have no clue what to do and even less interest in helping anyone but themselves. I could waste my time and your and ask you to write or call your representatives and make some noise but we know how that works out by now.
Have a good night.