Little Scrutiny of Gov’t's Rapid Financial Rule Changes
With the global financial system teetering on the edge, the U.S. government has been making historic moves on a near-daily basis. Some—like the $700 billion bailout—have garnered big headlines. Other decisions have been little noted in the whirlwind.
The changes “affect everything from the way Americans protect their money to the way businesses finance inventory; from the way banks raise capital to the way banks borrow funds from each other,” says the Wall Street Journal (sub. req.).
The Journal notes that the new rules have something else in common: The “details are almost always hashed out behind closed doors.”
As the Journal puts it, the government has “redrawn the rules under which U.S. financial markets operate,” and even changes “authorized by Congress—such as higher ceilings on federal deposit insurance—were approved at the last minute with little if any discussion.”
“The lack of accountability and thoughtful review of these initiatives is really sort of jaw dropping,” said Tom Schlesinger, who heads a nonprofit that monitors the Federal Reserve.
Of course, such quick action and circumventing of the rule-making process may well be necessary. “I wish we had more time,” House Financial Services Committee Chairman Barney Frank (D-Mass.) told the Journal. “These are hard choices and hard judgments, but I’m not inclined to think that our second-guessing them is a good idea.”
At the least, the Journal provides a helpful overview of what all the changes have been. A small sample, from the WSJ:
- Tuesday, the Federal Deposit Insurance Corp. proposed roughly doubling the fees it charges banks to recapitalize the fund that guarantees bank deposits, which has been depleted by recent bank failures.
- Last month, the Fed waived normal review and public debate when it quickly approved applications from Goldman Sachs Group Inc. and Morgan Stanley to become bank holding companies.
- Federal regulators also proposed allowing banks to set aside less capital to cover potential losses from holdings of debt issued by mortgage giants Fannie Mae and Freddie Mac.
- The Internal Revenue Service issued a three-page notice last week that makes it more attractive for one bank to buy another bank by allowing earnings to be offset in certain cases.
As the Journal notes, “it is unclear when or if” the changes will be rolled back.
Get Updates
Our Hottest Stories
- Freddie Mac Bets Against American Homeowners
- Why Fannie and Freddie Are Hesitating to Help Homeowners
- Bets Against Homeowners Must Stop, Freddie Mac Was Told
- Drive-by Scanning: Officials Expand Use and Dose of Radiation for Security Screening
- By the Numbers: Life and Death at Foxconn
- How the Stimulus Revived the Electric Car
- $10 Million Fine on Red Cross Highlights Its Troubled History of Blood Services
- Allergan Erases Doctor Payment Records
- With Spotlight on Super PAC Dollars, Nonprofits Escape Scrutiny
- Senators Slam Freddie on Bets Against Homeowners
- Freddie Mac Bets Against American Homeowners
- Drive-by Scanning: Officials Expand Use and Dose of Radiation for Security Screening
- How the Stimulus Revived the Electric Car
- Meet the Obscure Federal Regulator Who's Not Helping Homeowners
- By the Numbers: Life and Death at Foxconn
- Why Millions Won't Get Help From Big Mortgage Settlement
- Why Fannie and Freddie Are Hesitating to Help Homeowners
- $10 Million Fine on Red Cross Highlights Its Troubled History of Blood Services
- One Soldier's Progress Against Traumatic Brain Injury
- Bets Against Homeowners Must Stop, Freddie Mac Was Told
1 comments
larry lynch
Oct. 8, 2008, 6:22 p.m.
There is more than a possibility that banks & the stock market will be re-regulated. One wonders if the Glass…Act which forbid banks from brokerage will be fully reinstated or an eviscerated, toothless, bill which is missing a limb or so will be touted as Glass…, II. There is little to no reason to trust W & his cohorts, particulary Mr Paulson, as the attempt to re-regulate banks & other financial enterprises. Since BH Obama has mad a much heralded move to the right to the so called center, one dare not expect Obama to be as bold as FDR was when he started rebuilding the USA in 1933. We may have to do with gradual, piece meal, toothless reforms. We are in for constant hurricaine level storms, giant typhoons, tsunamis & a series of mamouth earthquakes plus twisters every 2 hours or so as the world crawls to recovery & begins partial, limited reconstruction of something which might resemble financial & banking systems. Presently, Obama’s advisors can’t be bold or original. The world & the USA may be forced to muddle through as recovery is haltingly started. Those who expect financial miracles will not get them in the 1st 100 days of an Obama administration. W’s mess of wreckage will be difficult to find & very hard to clear. Nobody seems to know where the bottom is & where all of the rubble is scattered. It could take well over 2 years to survey the damage. Designing structures of much needed financial regulatory institutions will take a lot of time too. We may be forced to learn by costly, slow trial & error steps. That could mean that we’ll take 5 steps ahead but be forced to take 4 steps back as the new, untried institutions collapse to leave us more rubble. If one enjoys work & daunting challenges, they will love the next 30 years. The rest of us will have to deal with alternating long periods of fright followed by frustration & immense depression before we’ll see a minute of success.
We will learn why wishing that someone lives in interesting times is a curse. Since we are going to the sub-basment, we can’t jump out of windows & fall to death. Oh, the challenges (vile, obscene, expletives deleted). The coming years may build character, endurance, resolve, patience & other so called virtues. We have been able to avoid cultivating these things for 70 or so years. Yes, these will be interesting times, damn it.
Commenting on this story is closed.