Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Real Financial Reform... or Political Gridlock?

Politics / Market Regulation Mar 04, 2010 - 05:40 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleShah Gilani writes: U.S. senators Christopher Dodd, D-CT, and Bob Corker, R-TN, have fashioned a compromise on stalled banking regulation that straddles divisions over establishing a financial consumer protection agency and addresses unwinding too-big-to-fail firms.

The deal deftly divides lawmakers on both sides of the aisle in the Senate, as well as in the House of Representatives, which passed its plan for financial reform in December.

By engineering gridlock in the nation's capitol, lawmakers seem determined to stall any meaningful overhaul of financial-markets regulation. But rather than counting on backsliding into the status quo to grease the wheels of economic recovery, the overhang of unresolved and ineffectual legislation threatens long-term investor confidence and desperately needed public protections.

By proposing a protection agency helmed by the U.S. Federal Reserve, the Senate has compromised President Barack Obama's call for an independent financial consumer protection agency.

Arguments against establishing such an agency included fears of expanding bureaucracy and interference into free-market access to credit.

However, the compromise to establish a protection agency under the Fed doesn't address the spreading bureaucracy of that institution. And worse, opponents of the Fed point to how the central bank mishandled its already-existing oversight authority of banks, the banking system and loose-interest-rate policies that helped precipitate the housing bubble and credit crisis.

Fed bashers further point to the controversial power of bankers who run the Fed and the inescapable fact that the Federal Reserve System is a network of private banks acting as an independent arm of the U.S. government. Giving the Fed consumer-protection powers to safeguard the public from unscrupulous moneymen is like having a wolf guard the proverbial henhouse.

We need to ask our lawmakers why they aren't in favor of an independent financial protection agency and why they are granting bankers status as our shepherds.

The Senate's handling of too-big-to-fail companies that, when insolvent, threaten the financial system and economic prosperity amounts to a hall pass for bullies to continue roaming America's business corridors.

If banks fail, the Federal Deposit Insurance Corp. (FDIC) is there to pay off insured depositors and unwind failed institutions. It doesn't matter how big any bank is: If the FDIC doesn't have the money to make depositors whole, the federal government is there as a backstop.

The Senate, while completely bypassing the need to address too-big-to-fail banks - how firms get that big and how they threaten systemic Armageddon - chose instead to focus on what to do about too-big-to-fail companies that are not banks, but pose massive systemic risks.

Rather than address how bank holding companies, bank subsidiaries, or other non-bank capital markets and financial-oriented institutions can be restrained from growing to a size that threatens calamity, the Senate wants to give the FDIC authority to facilitate the oversight or unwinding of these companies via a type of bankruptcy process.

The compromise supposes that regulators would have options to force an FDIC-controlled dissolution of teetering giants, but only in agreement with the Fed's board, a council of regulators, and the Treasury secretary.

But, of course, in such an emergency, where the failure of one or more giant institutions would threaten America's economic life, regulators may deem it necessary to facilitate bridge loans and any manner of other government guarantees to keep bloated, insolvent and risky private companies alive for the greater good of the U.S. economy - not to mention the companies' handsomely paid executives.

In other words, the compromise efforts in the Senate are nothing more than backsliding into the status quo that serves the entrenched interests that got the United States, and the world, into the mess the financial system continues to face.

The same arguments surround both of the proposed compromises that have been circling in the public debate over how to safeguard the complex financial system we all rely upon to create job opportunities, keep banks safe, and maintain the web of financial systems that underpin our capitalist democracy.

Washington gridlock is too often engineered by compromises that stymie the kind of meaningful changes that will threaten entrenched interests.

Free markets and democracy both need to be safeguarded. While most of us seem to be comforted by a standing military, with an established command-and-control apparatus at the ready to defend our way of life, not enough of us are willing to support safeguarding our free markets with a sensible regulatory apparatus to ensure our economic freedom.

America is a magnificent and ever-evolving experiment in establishing rights and safeguarding freedom. We change laws all the time. It is now time to change the laws and regulations that have failed us and threaten our prosperity.

We must demand that our legislators change existing laws and regulations to better safeguard our economic future. And we have to make them painfully aware that if we don't get those changes - or if we get changes and unintended, unforeseen consequences arise - lawmakers, presidential administrations and even presidents themselves will be held accountable.

Our elected officials serve at our pleasure: As the world changes and crises arise, they must manage their way through an appropriate evolution - or face a justifiable revolution at the polls.

Source :

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in