Skip to main content

The Fed Leviathan grows

Well, it didn't take long for the rumors of a new Federal Reserve-led regulatory regime to blossom into a full blown policy announcement. Today, Treasury Secretary Hank Paulson announced plans for the an overhaul of the nation's financial regulatory structure.

In what MSNBC.com calls the "most sweeping changes since the Great Depression", the plan set forth by the Bush administration would enlarge the regulatory role of the Federal Reserve and the SEC and create a "superagency" to oversee financial markets.

Here's more from the LA Times:

"Treasury Secretary Henry Paulson today unveiled a 218-page blueprint for regulatory reform that would represent the largest federal overhaul since the Great Depression.

The blueprint, widely previewed before the secretary's remarks, would give the Federal Reserve more authority to oversee the markets and would create one superagency to oversee both investor protection and market stability, assuming many of the tasks of current agencies, such as the Securities and Exchange Commission and the Office of Thrift Supervision."

So as the Federal Reserve Leviathan looks to expand in size and scope, those who still have a sense of the risks inherent to capitalism wonder how increased regulation could ever help anybody outside of those being "regulated".

"Socialist-style Fed or financial saviour?

The cover of the latest issue of BusinessWeek shows Ben Bernanke in profile against a bright red and orange backdrop, pensively stroking his grey beard and looking remarkably like Vladimir Ilyich Lenin.

The imagery is intentional and pointed.

“Comrade Ben is determined that there will be no financial meltdown and no depression while he is in command,” economist Ed Yardeni wrote to clients. “Given the initial reaction [on Wall Street], I suppose this means we are all financial socialists now.”"

Unfortunately, you had to have seen this kind of thing coming down the pike. The current environment of Fed bailouts and increased regulatory powers started to take hold last summer as the debate over the Fed's liquidity injections and loan cap removals began.

The Fed/taxpayer-assisted bailout of Bear Stearns was just the most visible example of these actions to date. That is, until, today's announcement on the new regulatory overhaul was made.

What are the full implications of this newly proposed regulatory structure? What can we expect with the Fed guarding the henhouse?

We'll stay tuned to this issue, and I hope that some of our knowledgeable readers will help point the way by sharing their comments and insights.

Popular posts from this blog

Nasdaq credit rating junked.

S&P cut Nasdaq's credit rating to junk status citing debt burdens and its questionable strategy to buy a controlling interest in the London Stock Exchange. Financial Times reported that the exchange's counterparty credit & bank loan rating were lowered fromm BBB- (lowest investment grade rating) to BB+. The change will increase Nasdaq's borrowing costs should it wish to pursue aquisition targets. For an earlier look at the exchange consolidation trend that brought about Nasdaq's push for a stake in the LSE, please see "Exchange fever" .

Clean Money - John Rubino: Book review

Clean Money by John Rubino 274 pages. Hoboken, New Jersey John Wiley & Sons. 2009. 1st Edition. The bouyant stock market environment of the past several years is gone, and the financial wreckage of 2008 is still sharp in our minds as a new year starts to unfold. Given the recent across-the-board-declines in global stock markets (and most asset classes) that have left many investors shell-shocked, you might wonder if there is any good reason to consider the merits of a hot new investment theme, such as clean energy. However, we shouldn't be too hasty to write off all future stock investments. After all, the market declines of 2008 may continue into 2009, but they may also leave interesting investment opportunities in their wake. Which brings us to the subject of this review. John Rubino, author and editor of GreenStockInvesting.com , recently released a new book on renewable energy and clean-tech investing entitled, Clean Money: Picking Winners in the Green Tech Boom . In Clean ...

Jesse Livermore: How to Trade in Stocks (1940 Ed. E-book)

If you've been around markets for any length of time, you've probably heard of 20th century supertrader, Jesse Livermore . Today we're highlighting his rare 1940 work, How to Trade in Stocks (ebook, pdf). But first, a brief overview of Livermore's life and trading career (bio from Jesse Livermore's Wikipedia entry). "During his lifetime, Livermore gained and lost several multi-million dollar fortunes. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. He subsequently lost both fortunes. Apart from his success as a securities speculator, Livermore left traders a working philosophy for trading securities that emphasizes increasing the size of one's position as it goes in the right direction and cutting losses quickly. Ironically, Livermore sometimes did not follow his rules strictly. He claimed that lack of adherence to his own rules was the main reason for his losses after making his 1907 and...