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Financial Regulatory Reform / NY Times
Our comments in blue (mrc)
At the risk of confusing the issue, If I were President -- I would put this Financial Regulatory Reform on the back burner and focus on Healthcare Reform. (mrc)
President Barack Obama has to learn how to pick his fights
Updated: Aug. 6, 2009
The near-collapse of the world financial system in the fall of 2008 and the trillions in losses generated by banks and other financial institutions led to widespread calls for changes in the regulatory system. On June 17, 2009, President Obama proposed a new regulatory structure for the country's financial system, declaring that it is needed to protect the rights of ordinary consumers and to guard against the murky practices that led to the current monetary crisis.
Hooray for him. But wait until the dust clears in the Money and Banking Business -- before you make changes. (mrc)
Before changes are made in the Money and Banking business -- we all have to understand how those businesses work.
See << http://www.primeronmoney.com >> for more on that concept (mrc)
Out of the complex plan, two features stood out -- and became the focus both of opposition from industry lobbyists and of behind-the-scenes turf wars among regulators.
The first is a proposal to give the Federal Reserve greater supervisory authority over large financial institutions whose problems pose potential risks to the economic system. The second would take some of the existing agencies' powers to oversee mortgages, credit cards and other kinds of consumer debt and give them to a new regulator, tentatively called the Consumer Financial Protection Agency.
A clever manager of that new agency could very easily assume that one of the agencies' jobs was to have a few people looking out for controlling consumer healthcare costs by setting up an arm's length department that would be a Wal Mart type buyer and seller of medical supplies, tools and medicines -- buying from worldwide manufacturers and selling to consumers. (mrc)
Both of these are necessary. It will be particularly good if they have built in natural controls and very little bureaucracy. It is possible to devise such plans. (mrc)
Mr. Obama and Treasury Secretary Timothy F. Geithner touted the creation of the consumer agency as the plan's biggest step to offer greater protection to the public in the wake of the subprime scandal and in the face of mounting outrage over credit card fees and interest rates. Blocking its creation quickly became one of the top priorities of the banking industry, which argues that consumers would suffer if the new regulatory body constrained their choices. It was also opposed by the Fed, which currently has responsibility for some functions the new agency would take over.
How can anyone tell the President he can't simply take over those duties and assign them to an existing group(s) that report(s) to him now? see partial list below
(1) Administration for Children and Families (2) Administration on Aging (3) Agency for Healthcare Research and Quality (4) Agency for Toxic Substances and Disease Registry (5) Air Force Medical Operations Agency (6) Air Force Medical Support Agency (7) American Indian Liaison Office (8) American Indian and Alaska Native Affairs Desk (9) Armed Forces Retirement Home (10) Army Medical Department (AMEDD) (11) Army Research Laboratory (ARL) (21) Arthritis and Musculoskeletal Interagency Coordinating Committee (13) Health Resources and Services Administration (14) Health Services (15) Human Resources Center (16) Human Resources Management / (17) Human Systems Department / (18) Medical Science and Technology Division (19) Veteran's Hospitals (20) existing Government hospitals -- AND THERE MUST BE 20 MORE (mrc)
The expansion of the Fed's powers, on the other hand, has drawn fire not only from Republicans who see the bank as becoming too powerful, but by the existing regulators whose role would be diminished.
They would not be expanding the Fed's powers. (mrc)
This would all be done without new costly legislation. The President certainly can't be told how to run all the agencies that report to him. He runs the Executive Branch of our government. It is my guess that nobody can stop him from telling those agencies what they can and can't do -- as long as he doesn't violate any existing laws. What existing laws prohibit him from setting up a Department of Medicine and Health that would coordinate all existing Executive Branch facilities. (mrc)
At a House hearing on July 23, Ben S. Bernanke, the chairman of the Federal Reserve; Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation; and John C. Dugan, the comptroller of the currency, all criticized aspects of the consumer agency plan, while Ms. Bair and Mr. Dugan, who have clashed separately over their agencies' roles in the crisis, both spoke out against the growth of the Fed.
The open display of opposing views, which Mr. Geithner characterized as regulators understandably protecting the prerogatives of their agencies, showed how cumbersome the current financial regulatory system can be. An alphabet soup of agencies oversee the nation's financial system - sometimes in conflicting ways.
Mr. Obama's proposal would also separately expand the reach of the Federal Deposit Insurance Corporation to seize and break up troubled financial institutions. And it would create a council of regulators, led by the Treasury secretary, to fill in regulatory gaps. The plan seeks to give Washington the tools to police the shadow system of finance that has grown up outside the government's purview.
The president has also asked Congress to merge the Office of Thrift Supervision, the beleaguered agency that missed problems at IndyMac, Washington Mutual and the American International Group, into the Office of the Comptroller of the Currency, a Treasury unit that supervises the largest banks.
Other elements of the plan include: tighter rules on banks that package and sell securities that are backed by mortgages and other debt; new conflict of interest rules for the credit rating agencies; and requirements that companies that issue mortgages retain at least 5 percent of them on their books to discourage companies from marketing unsuitable loans.
It would also require all advisers of hedge funds and private equity funds to register with the Securities and Exchange Commission and open their books to regulators. And it would impose new conflict of interest rules on the credit rating agencies.
In early August, financial regulators again went to Congress and raised objections to major portions of President Obama's plan. The dissident regulators -- senior officials at the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency -- told the Senate banking committee that the new consumer protection agency the president proposes to transfer some of their authority to would never be as effective as they have been.
But instead of modifying or withdrawing the plan, Mr. Geithner warned the regulators that they are partly responsible for the economic crisis and that their objections play into the hands of industry groups that seek to kill the plan.
Obama administration officials, confirming an account first disclosed in The Wall Street Journal, said Mr. Geithner upbraided top regulators at a Treasury meeting for airing their views. The participants included Mr. Bernanke, Mr. Dugan and Ms. Bair.
But the meeting appeared to do little to discourage the regulators from publicly expressing their concerns with elements of the plan.