It is essential that new rules and regulations be put in place, probably important for new agencies be created and possibly re-organization occur-- but it is downright insane for the Dems to allow Bush to just submit the plan and accept it.
The NY Times reports on this development. I cite some remarks in the article:
As the full effect of the credit crisis becomes clearer, the political stakes are growing.
Mr. Paulson is clearly taking a stand against critics who support even stricter regulations, while rejecting any notion that the crisis in financial markets or the collapse of Bear Stearns can be laid at the administration’s doorstep. In a draft of a speech to be delivered Monday, he declares: “I do not believe it is fair or accurate to blame our regulatory structure for the current turmoil.”
And while he argues that the current regulatory structure is outdated, Mr. Paulson’s vision for the future echoes the traditional Republican view that new rules and agencies are no substitute for market discipline.
Perhaps it's good news that the new powers given to the Fed are very limited, but it also seems that they are then, more for show, and are wielded by non-government, non-legislator approved people. Danny Schechter, at Mediachannel.org, writes, in his article, Fed Up: Foxes Charged With Guarding Financial Coop
...despite its obsession with surges and bombing Iraq back to its idea of “normalcy,” the White House says it now feels our pain and has decided to act. Well, at least, to let former Goldman Sachs CEO Hank Paulson, now our Treasury Secretary, (in the tradition of former Goldman Sachs exec Robert Rubin who followed the same career path) impose yet another new pacification plan.
Paulson has studied the crisis, studied it deeply, and realized the culpability of the brokers and the banks in engineering the disaster. His solution: kick the ball over to The Federal Reserve Bank. He’s enlisting the Fed foxes to guard a Wall Street chicken coop at risk from a dangerous form of bird flu. (The technical term is ‘greeditis” enabled by regulatory arthritis.)
He knows that most Americans — and most of the media — think the Fed is a neutral government agency with a public interest mandate. They think it has the expertise and the power to swoop down and save us from our misery, despite the fact that eights months of rate cuts and capital “injections” have failed to stem the contagion of collapse.
The NY Times writes:
But the Fed would not be able to act simply because one bank or brokerage house was taking excessive risk. Instead, the Fed’s “authority to require correction actions should be limited to instances where overall financial market stability was threatened,” the proposal states.
The Fed has long had great prestige in Washington, but in the current crisis it has seen its decisions challenged from both the left and the right.
“The Fed oversaw this meltdown,” said Michael Greenberger, a law professor at the University of Maryland who was a senior official of the Commodity Futures Trading Commission during the Clinton administration. “This is the equivalent of the builders of the Maginot line giving lessons on defense.”
The Fed’s former chairman, Alan Greenspan, for years praised the growth in the derivatives market as a boon for market stability, and resisted calls to use the Fed’s power to increase regulation of the mortgage market.
On the right, some were appalled by the decision by federal regulators to intervene to keep Bear Stearns from collapsing. “I want market discipline, too, but you don’t do it by empowering the Fed,” said Representative Scott Garrett of New Jersey, a Republican on the House Financial Services Committee. “We’re trying to get transparency for the market from an institution that’s not transparent in its own workings.”
