Posts filed under “Regulation”
In what I can only type with a combination of disgust and astonishment, SEC Chairman Christopher Cox blames the current crisis on the “boom-and-bust cycles” of markets.
“Financial markets, of course, are not perfect. In particular, they are susceptible to boom-and-bust cycles. Cycles of this sort have been a hardy perennial over the past 400 years of experience with organized markets. Addressing the results of these cycles is why we have protective mechanisms such as the Federal Reserve System and federal deposit insurance.
But clearly these mechanisms proved inadequate to prevent the current crisis. As the Congress and the new administration consider what improvements are necessary, they should take exceptional care to preserve the premise of well-ordered markets that underlies our enforcement and regulatory regime. Maintaining the arm’s length relationship between government, as the regulator, and business, as the regulated, is essential. Otherwise, when the government becomes both referee and player, the game changes dramatically for every other participant.
Rules that might be rigorously applied to private-sector competitors will not necessarily be applied in the same way to the sovereign who makes the rules. On several occasions during the past year the Treasury and the Fed took on the unusual role of negotiators and principals in merger and acquisition transactions that normally would have been arranged by private parties. Even in these extraordinary cases, however, it remained the role of the SEC to regulate these transactions for the protection of investors. We took pains to stay at arms length in these cases, but our close collaboration with these same government agencies has made this truly terra incognita.”
Talk about an imperfect messenger: You will note that nowhere in his entire Op-Ed is there any mention of the role of the SEC in the entire credit or financial mess — most notably, the SEC’s nonfeasance. They utterly failed to discharge their legal responsibility to regulate the Rating Agencies (Moody’s, S&P, Fitch). Note that these same agencies are the ones that slapped triple AAA rating ont he mortgage backed paper at the root of the current crisis.
Nor does he address the role of the SEC in allowing the 5 biggest investment banks — now wards of the state — to waive net cap rules and lever up to 40-to-1.
Cox takes zero personal responsibility for the current crisis for the acts of his own agency, or even himself.
You may dismiss the entire Op-Ed written by the Chairman as a steaming pile of cluelessness and evasive subject changers.
Whether you read it or not is up to you, but my advice: Don’t step in it.
We Need a Bailout Exit Strategy
Let’s not forget that free markets made America strong.
WSJ, DECEMBER 10, 2008, 11:24 P.M. ET
Terrific piece in Vanity Fair by Nobel prize winner Joseph Stiglitz. I especially love the accompanying art work nearby. Stiglitz is da man: “The administration talked about confidence building, but what it delivered was actually a confidence trick. If the administration had really wanted to restore confidence in the financial system, it would have begun…Read More
“Let me ask you, where in the CRA does it say to make loans to people who can’t afford to repay? Nowhere.” -FDIC Chairman Sheila Bair > This is old news to readers of the Big Picture, but I wanted to at least excerpt this: “I want to give you my verdict on CRA: NOT…Read More
Here is a question that I have been wrestling with: What exactly did the repeal of the Glass-Steagall Act accomplish? Were there positives as well as negatives? Should the Gramm-Leach-Bliley Act be repealed, and Glass-Steagall reinstated? > ~~~ What say ye? >
“In hindsight, it was spot on.” -Jeffrey Brown, former top official at the Office of Comptroller of the Currency, one of the first agencies to raise concerns about risky lending. > A brutally damning article about the warnings the Bush administration received and ignored was published this morning by the Associated Press. The AP summed…Read More
The Obama team is keeping its cards close to the vest. That’s probably a good way to manage expectations, good politics and it may even be good policy. Until the new team can get in place, there doesn’t seem much point in sending signals or taking responsibility for actions they cannot control. More to the…Read More
What does the future hold for regulating Wall Street? Regardless of who wins today’s election, both Barack Obama and John McCain have staked out different positions on issues involving economic regulation – and each is very different than the outgoing president. The Economists’ Voice looks at what we might expect in the post-Bush era: While …Read More
I hate politics. I cannot stand the maneuvering to avoid discussing issues, and instead focus on name calling. The latest idiocy is the entire Socialist meme, which, having seen the banking industry nationalized, is a bizarre charge to make these days. It is especially odd, given the nature of wealth distribution in a capitalist system…Read More