Friday, June 12, 2009

Next on the Agenda: A Council of Regulators

FT reports:

Tim Geithner, the Treasury secretary, will next week unveil revised plans, which are likely to include the creation of two new structures on top of the existing alphabet soup of agencies. These will include a “council of regulators” – likely to comprise the heads of the largest agencies – which will oversee the ?Federal Reserve’s new uber-regulatory role of overseeing systemic risk.

There is also likely to be a new agency to regulate consumer products, such as mortgages and credit cards. Far from simplifying Washington’s inefficient system of regulation, many fear the envisaged reforms will “Balkanise the Balkans”, as one financial lobbyist put it.
FT is spinning this story as though the financial sector has won. But the "winners" are the current regulators such as the SEC and CFTC, which will not be merged. Both feifdoms have survived--with a new super regulator above them.

Others are spinning the story to suggest that this is somehow a loss for Obama, since he wanted a complete overhaul of the financial system, and this is a diluted version. I don't see it that way. A "Council of Regulators" could be a face saving measure with no real power under some administrations, but the Obama Administration is not about face saving, they are about taking control. Thus, the formation of a Council of Regulators must be viewed as another power point form from which regulation will eventually come down., Likewise, with the new agency to regulate financial consumer products.

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