Inside the Paulson Plan
Paulson proposes combining federal bank and thrift regulators, creating a federal insurance regulator and merging the Securities and Exchange Commission with the Commodities Futures Trade Commission. He also recommends the creation of a Mortgage Origination Commission to oversee the licensing of mortgage lenders.
But he potentially dilutes the power of state regulators by emphasizing greater authority for a new federal deposit institution regulator. State power to regulate banks has been waning in the last decade as major institutions switched their licenses to federal charters to take advantage of less restrictive consumer privacy and other regulations at the federal level.
And it comes as existing federal agencies are scrambling to respond to the crisis amid tighter budgets. The Federal Deposit Insurance, for example, is increasing its staff 60% to prepare for an expected wave of bank failures. On Friday, it cracked down on another mortgage lender, ordering troubled California-based Fremont General to raise capital or sell its bank subsidiary in 60 days.
In insurance, where regulation is entirely at the state level, a proposed federal regulator is bound to provoke opposition. New York state's insurance commissioner, Eric Dinallo, has been at the forefront of one aspect of the credit crisis: trying to rescue the bond insurance industry by pushing the companies to raise capital and inviting new companies into the sector, including Berkshire Hathaway. The bond insurers, most of them heavily exposed to credit derivatives, are scrambling to avoid credit rating downgrades that could impede their ability to provide insurance to the $2.6 trillion municipal bond market.
The plan is the result of a study Paulson commissioned last June, just before the markets started to implode. In transferring more authority over the markets to the Federal Reserve, the plan tries to close gaps in regulation that helped create the current credit crisis, including the fact that many of the subprime mortgage lenders that contributed to the housing bubble operated outside the grasp of banking regulators.
Reform took on more urgency earlier this month when the Fed and Treasury intervened in the collapse of Bear Stearns, pushing it into a merger with JPMorgan Chase to avoid a bankruptcy filing and a potentially cataclysmic rush to sell assets.
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Member Comments
Posted By: sivere @ 04/06/2008 3:38:16 PM
Comment: The Paulson plan is window dressing. It is the Congress who has the authority to create and regulate the currency and credit, not the Executinve (Treausry); though clearly the treasury enforces the rules.
Look, we (the taxpayer) are going to pay for whatever mess the banks get themselves into, all ni the name of "stability". We have the resopnsibility. The constitution also gives us the authority (through our representatives). We need congress to retake the Fed and reorganize/replace or otherwise develop a better more accountable system. Please see "TakeBackTheFed.com".
Posted By: Texas Jake @ 04/01/2008 2:07:43 PM
Comment: I saw GWBush throw the first pitch in baseball on youtube to a stadium full of intense boos. He just smiled and waved like it was actually cheers. It is a typical glimpse of his approach to our countrys problems. I hate that glassy-eyed geezer. He's not hurting for grocery money; why should he care that we are? Helpless and hopeless... not the America I want for my kids. Oh yeah, voting only hurts because it gives the illusion people can make changes... all it does is move the clock down the road a ways... pfffft
Posted By: vznuri @ 03/31/2008 9:03:26 PM
Comment: talk about making a deal with the devil...
"fractional reserve banking as economic parasitism"
http://econpapers.repec.org/paper/wpawuwpma/0203005.htm
endorsed by two phd economists. printed in nexus
magazine, 60k world circulation. #1 top downloaded
economics paper. used by economics
teacher in australia as standard classroom material.
more info on request.
recent supporting material:
The Shock Doctrine: Naomi Klein on the Rise of Disaster Capitalism
http://www.democracynow.org/article.pl?sid=07/09/17/1411235
Confessions of an Economic Hit Man: How the U.S. Uses Globalization to Cheat Poor Countries Out of Trillions
http://www.democracynow.org/article.pl?sid=04/11/09/1526251
John Perkins on "The Secret History of the American Empire: Economic Hit Men, Jackals, and the Truth about Global Corruption"
http://www.democracynow.org/article.pl?sid=07/06/05/149254
Video, senator/pres candidate Dennis Kucinich
at last years 2005 Monetary Reform Conference
http://www.monetary.org/video/kucinich/win_broadband.wmv
Money as Debt, video by Grignon
http://video.google.com/videoplay?docid=-9050474362583451279