Monday, April 7, 2008

Paulson's Obfuscation

"In case you're wondering, Henry Paulson didn't put little X's and O's after his signature when he signed his plan to revamp financial regulation. I checked. It's such a loving gift to his friends on Wall Street, I thought maybe he'd sealed it with a kiss. ... Having failed to follow its own lending standards, the industry has shown it needs more oversight. The rest of Paulson's plan, though, is an insult to the trees that perished in it's name. It is a document of distraction. ... It is, of course, a political dodge. ... Nothing in those 218 pages, for example, addresses the role credit rating agencies played in offering Treasury-grade blessings on risky subprime debt. Then there's the plan to increase the power of the [Fed] by expanding its oversight and giving it a mandate to ensure 'market stability.' ... It's not clear, though, where the Fed's new powers would stop. ... The plan also includes other Wall Street favorites, such as combining the [SEC] and the [CFTC]. Given that the two major exchanges already combined their regulatory operations, Paulie's playbook further winnows the number of cops on the beat. Meanwhile, his proposal for a national insurance charter, an issue beyond the outer rim of the current crisis, is simply a gift for which national insurers have long pined. They say it's more efficient, which means translated for consumers probably higher rates and less coverage. ... The shadowy group of money men [Working Group on Financial Markets] is the same one that less than a year ago argued that too much regulation was hurting U.S. companies abroad. Their cries of over-regulation drowned out sounds of the burgeoning crisis that had dampened the competitiveness of our markets far more than regulation. Most disturbing, though perhaps not surprising, is the absence of accountability written into Paulie's playbook. ... The Fed answers to no one. ... This isn't the plan Amrica needs. It's what Wall Street wants", Loren Steffy (LS) at the Houston Chronicle, 2 April 2008.

Larry "Summers, the former Treasury Secretary, says the Fed in any case might not be up to the task. 'It's not realistic to think that career civil servants are going to forsee bubbles that are about to burst in ways that are better than those who have their large fortunes on the line,' he said", WSJ, 31 March 2008.

"Groups ranging from small banks to state attorneys general criticized Treasury Secretary Henry Paulson's proposals to consolidate regulatory agencies and revamp oversight of a financial system bruised by crises in the credit and housing markets. ... Critics aren't shy about making their feelings known. For example, smaller banks fret that creation of a single banking regulator will favor the desires of their bigger competitors. ... Other groups that have expressed early opposition include credit unions. ... State prosecutors complain that a proposal to create a national insurance regulator would substitute their vigilance with weak federal oversight. ... States attorneys general, a powerful group, contend that the Paulson proposals will usurp their enforcement powers, particularly over the insurance industry. ... Paulson argued that state regulation needed to be more even and consistent. He proposed creating a federal commission to judge and grade state policies related to mortgage lending", WSJ, 1 April 2008.

Hank Paulson (HP) is a proponent of "fiat money slavery". He wants all Americans to bail out his Wall Street cronies by holding continually debased dollars. He fights federalism by trying to increase federal oversight of, among other things, insurance companies, pre-empting state regulation, he releases his plan after Eliot Spitzer's demise. How neat. I disagree with LS about one thing: we don't need more regulation, we need more Wall Street firms going bankrupt. Oh yes, and more indictments of the heads of these firms. Well Mike Garcia, the ball's in your court.

Face it, HP wants to gut state regulation of anything to protect his big business cronies.

Summers echoes what Milton Friedman said over 30 years ago. I remember.


Buzz Saw said...

They can decree that the fed can walk on water, and is omnipotent too. Little boys playing games.

Independent Accountant said...

Unfortunately we all live in Helicopter Ben's playpen. The only escape we have is gold.

Buzz Saw said...

Unfortunately we all live in Helicopter Ben's playpen.

I may have to dally in Ben's playpen, but I spend most of that time hitting him over the head with a toy hammer. ;)