Thursday, April 24, 2008
The Bloodless Coup Continues-5
"'It will have the license to go everywhere: private equity funds, investment banks, hedge funds,' [Robert] Steel, the under secretary of the Treasury for domestic finance, said in an inverview last week. ... In fact, he is a former vice chairman of Goldman Sachs, the big investment bank. And in the last two years, Mr. Steel has been co-chairman of one commission that claimed heavy-handed regulation was stanching financial innovation and another that argues the hedge funds could police themselves. His apparent conversion to the merits of regulation illustrates how the laissez-faire bones of the Bush administration have been rattled by the government-brokered rescue of Bear Stearns and the trauma of the credit crisis. ... In truth, the plan may well fail to become law because some of its prescriptions, like diluting the powers of the [SEC], have drawn fire from those who have long believed that the Treasury has an antiregulatory bias. .. The regulator would pass judgment on the capital levels, trading exposure and leverage of Wall Street's most sophisticated institutions. ... Steel's enthusiasm may represent less a philosophical conversion than an acceptance of raw political facts. ... Paulson disputes the notion that the plan of Mr. Steel is antiregulatory in the slightest. 'Bob has never been antiregulation,' Mr. Paulson said in his horse voice. At Goldman, he said, Mr. Steel was an effective liason with regulators and was often 'on the point of the spear,' when it came to dealing with them. ... As someone who reaped significant gains from his days at Goldman, and who further augmented his wealth from investments in some of Wall Street's most exclusive and successful hedge funds like Tontine Partners, Eton Park, TPG-Axon and Lone Pine Capital, Mr. Steel brings the practiced, experienced eye of the genuine participant to the task", my emphasis, Landon Thomas (LT) http://www.nytimes.com/, 15 April 2008.
Did Steel have a "Road to Damascus" conversion, or do we see something else? Did Steel realize his "former" employer, Goldman Sachs (GS) and other Wall Street houses were in financial trouble and wanted a federal bailout? Who better to do it than a GS-controlled Fed? Did Steel conclude it was time to dust off his "effective liason" skills and co-opt the Fed? LT misses something in writing of Steel's "apparent conversion". As I understand it, Steel was always consistent. If something is good for GS, it's good for the USA. See my 14 October 2007 and 6, 7 and 13 February and 7 April 2008 posts. A regulator with a "license to go everywhere" will not be subject to law. I'm sure Mussolini would have approved of such arrangements.