Talking Points Memo | Bush seeks financial regulation overhaul
The recommendations are the product of a yearlong review that was begun in an effort to modernize the government’s regulatory structure so that the country’s financial services industries could better compete in a fast-changing global economy.
And let’s forget that “modernizing” regulations so that big financial players could supposedly compete better is a big part of what got us into this mess.
The proposal would allow the Fed, in its new role as “market stability regulator,” to dispatch examiners to check the books not just of commercial banks but of all segments of the financial services industry.
Because what we really need is the Fed with the power to examine books and to lend hundreds of billions of dollars in taxpayer money to corporations it determines are in danger of insolvency. But no power whatsoever to tell those companies what capital reserves they must hold to cover their transactions, or what level of mind-blowingly stupid transactions they may or may not engage in.
The administration proposal would also consolidate the current scheme of bank regulation by shutting down the Office of Thrift Supervision and transferring its functions to the Office of the Comptroller of the Currency, which regulates nationally chartered banks. The plan recommends that the Securities and Exchange Commission, which regulates stock trading, be merged with the Commodity Futures Trading Commission, which regulates futures trades for oil, grains and various other commodities.
With no evidence that the Office of the Comptroller would get enough staff to handle the huge pile of additional work, or that they have the mindset to deal with an entirely different kind of banking enterprise. Or that the SEC and CFTC really need to be merged to work together.
The plan would create a national regulator for the insurance industry, which is now largely governed by the states, and would create a Mortgage Origination Commission to try to address the abuses exposed in the current tidal wave of mortgage defaults.
Ooh, because what we need is a commission to tell us that you don’t give negative-amortization loans to people with no documented income. And because states have proven so ineffective at regulating insurance companies, so very ineffective that insurance lobbyists have repeatedly tried (and failed) to get Congress to pass laws that would establish nationwide insurance rules that would preempt any stricter provisions enacted by state regulators, with an unfunded mandate for some brand-new office (staffed by whom?) that would magically acquire the expertise to recognize when insurance companies were pulling a fast one.
If this idea were in effect now, for instance, California would have been barred from investigating all those cases where insurors retroactively cancelled sick customers’ health insurance. Instead, that work would have had to come from the Bush Justice department. You know, the same one that just disbanded its anti-corruption office in California…
And so forth.