Two More Items on Reform of Financial Regulation

Two more items on the Obama administration’s proposed reforms of financial regulation. First, one by William Greider in the Nation:

Obama’s False Financial Reform
By William Greider | June 19, 2009

The most disturbing thing about Barack Obama’s call for financial reform was the way in which the president falsified our predicament. He tried to make it sound as though everyone was implicated in the financial breakdown and therefore no one was really to blame. “A culture of irresponsibility took root from Wall Street to Washington to Main Street,” Obama explained. “And a regulatory system basically crafted in the wake of a 20th century economic crisis–the Great Depression–was overwhelmed by the speed, scope and sophistication of a 21st century global economy.”

That is not what happened, to put it charitably. Unlike some other presidents, Obama is much too intelligent not to know this. The regulatory system was not overwhelmed by historic forces. It was systematically gutted and dismantled by the government in Washington at the behest of the banking interests. If Obama wants details, he can consult his economic advisors–Summers-Geithner–who participated directly as accomplices in unwinding the prudential rules and regulations. Cheers were led by the Federal Reserve with heavy lifting by both political parties.

The president’s benign version of events reminds me of what compliant politicians and opinion leaders said after the war in Iraq they had endorsed turned disastrous. “Hey, we were all fooled.” If Obama were to tell the truth now about what went wrong in the financial system, he would face a far larger political problem trying to clean up the mess. Instead, he has opted for smooth talk and some fuzzy reforms that effectively evade the nasty complexities of our situation. He might get away with this in the short run. Congress doesn’t much want to face the music either. But Obama’s so-called reform is literally “kicking the can down the road,” as he likes to say about other problems. In the long run, it will haunt the country because it fails to confront the true nature of the disorders.

Giving more power to the Federal Reserve to be the uber-regulator of banking and finance is a terrible idea (I examine the dangers in a forthcoming Nation article). Asking the cloistered central bank to resolve all the explosive questions about the over-reaching power of financial institutions is like throwing the problem into a black box and closing the lid, so people will be unable to see what happens next. That is the idea, after all, the reason Wall Street’s leading firms first proposed the Fed as super-cop, then sold it to George W. Bush and now Barack Obama. Give the mess to the Wizard of Oz, the guy behind the curtain. He can do miracles with money, but don’t watch too closely. This constitutes the high politics of evasion.

Read the rest of the article.

And this, from Jane Hamsher at Firedoglake:

238 Members of Congress Disagree with the President: The Fed Needs More Accountability
By: Jane Hamsher Monday June 22, 2009 7:09 am

The President wants to give the Federal Reserve more power to oversee systemic risk in the economy:

Obama, in an interview shown on the CBS Early Show, said the administration wants an overseer that “is accountable and clear when it comes to these large systemic firms that could potentially bring down the entire financial system. The Fed has the expertise and the credibility I think to do it.”

Asked whether lapses by the Fed contributed to last year’s crisis, Obama said, “It wasn’t the Fed where regulations broke down here.”

But 238 members of Congress disagree that the Fed is “accountable and clear,” and there are now 237 bipartisan cosponsors to Ron Paul’s H.R. 1207, the Federal Reserve Transparency Act, which would give the GAO the authority to audit the Fed and report its findings to Congress. Because right now, the Fed has loaned trillions of dollars in bailout money, and refuses to say where it went.

As Alan Grayson said in a letter to his colleagues, asking them to cosponsor the bill:

[T]he Federal Reserve has refused multiple inquiries from both the House and the Senate to disclose who is receiving trillions of dollars from the central banking system. The Federal Reserve has redacted the central terms of the no-bid contracts it has issued to Wall Street firms like Blackrock and PIMCO, without disclosure required of the Treasury, and is participating in new and exotic programs like the trillion-dollar TALF to leverage the Treasury’s balance sheet. With discussions of allocating even more power to the Federal Reserve as the ‘systemic risk regulator’ of the credit markets, more oversight over the central bank’s operations is clearly necessary.

As a result of Grayson’s efforts to whip Democratic cosponsors, 47 have signed on in the past two weeks alone, including Donna Edwards, Carol Shea-Porter, Jackie Speier, Dennis Kucinich, Heath Shuler, Jim McGovern and Jared Polis.

5780 people have endorsed Grayson’s efforts to bring accountability to the Fed, including Dean Baker, Naomi Klein, Bill Greider, Tyler Durden, Bill Black and Jamie Galbraith.

See the original post.

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