Friday, June 12, 2009

Geithner's impending new (revised) proposals

Treasury Secretary Geithner's new proposals are apparently due to be released next week, first for a Council of Regulators, and then for dealing with toxic assets.


ADVANTAGE: Geithner desire to create a Council of Regulators implicitly acknowledges officially that the Fed failed in performing its responsibilities, and therefore needs oversight.

A. The proposed Council body will consist of all the regulators put together. That is, they are supposed to watch each other!
It would be much better to create a genuinely independent body, as I have already proposed in this Blog among other places.
B. The Securities and Exchange Commission (SEC) and the Commodities and Futures Trading Commission (CFTC) do NOT merge; all the existing vested interests are happy; the multiplicity of regulation and regulatory bodies - and regulatory confusion - continues. In fact, regulatory confusion increases with another new body that is proposed, to to regulate consumer products, such as mortgages and credit cards
This is an extremely elegant way of doing no reform at all! Heads of the different regulatory bodies will now form a jolly new club in which they can keep an eye on the others and jointly neutralise anyone else in the Council who actually attempts to do anything.


I admire Geithner's continuing efforts to try and have OTC derivatives registered, with disclosure requirements imposed on exotic contracts; however, as far as I can see, the idea still seems to be that there will be only one exchange, regulated by the CFTC. I do not see the logic of having only one exchange, when we know that all monopolies lead to inefficiency, over-expensiveness and lack of service. At least seven or more exchanges, worldwide, please! And there's no reason why these complex instruments should be registered only in the USA! There's room here for international co-operation so as to grow a genuinely global marketplace! The rules and the framework should be global. Individual exchanges should be able to then compete with each other on a level playing field, freely. Sphere: Related Content

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