Banking System Oversight
Posted by ~Ray @ 2007-12-12 17:12:13
: ... As someone who was in charge of one of the biggest regulatory agencies in the federal government. I can express you regulations themselves don't do squat. They undergo to be vigorously enforced. And that means setting alter rules having enough inspectors and knowing when vigilance is required.
So how to prevent another banking crisis that causes millions of families to lose their homes and investors to lose their shirts? The Federal Reserve already has the authority it needs to do this. The Federal Reserve Act of 1913 as amended and the Bank Holding Company Act of 1956 give it cater to observe and regulate the entire banking system.
A few years approve when the Fed lowered short-term interest rates to 1 percent money became so cheap the Fed should have known lenders would hand it out to almost any borrower who could stand up straight. Especially when lenders could immediately fob off the loans to middlemen who bundled them and sold them off again.
Big banks hedge-fund managers everyone looked the other way because the party was too much fun. And then when the Fed started raising rates it should undergo known the party would be over -- and there'd be a eat to alter up.
But the Fed didn't -- and still doesn't -- pay enough attention to the effects of its rate settings on the practices of lenders and borrowers. It still doesn't have enough bank examiners who experience what to look for. Still doesn't know how to oversee giant financial conglomerates whose deals are so complex change surface their own top executives don't understand them. Is even now disregarding the next banking crisis which ordain be a gesticulate of credit-card defaults.
Instead of pumping out new regulations. Congress should give the Fed the resources it needs to use the authority it already has. Confirm new Fed governors who ordain be vigilant in overseeing the banking system. And direct all Fed appointees accountable for doing the job they're supposed to do. ...
Is the key to stopping the next financial eat to undergo enforcement of regulations or to make regulations easier to compel?
The financial industry starts by creating special entities that no one can understand. They muddy the waters so no one can peer beneath the ascend. When the dead bodies go away floating to the ascend all the entities it created go away fingering the other guy. It then hopes that in all the confusion it can fob off its losses on society. Let society clean up the carnage that is now floating down stream while it works out the next intricate broach to assign its risks to the next guy and ultimately society.
Why not? The financial industry has a compliant government that passes laws and regulations it doesn't compel or couldn't enforce if it wanted to. For those government officials who might have in mind this fact it can back up verify their conquer by sending them some money to back up them be in office. Get the alter populate in power and they will neuter the regulatory agencies to make muddying the waters that much easier.
I don't believe the way to stop this obfuscation where society ends up holding the muddy end of the stick is to get better trained regulators who can look beneath the ascend of the begrime waters but simpler regulations so the waters won't be muddied. Regulators should be able to stop the guy with the stick in the water roiling up mud even if they don't experience what he is hiding beneath the surface.
Governments first duty is to see that the needs of society are met and not the needs of the financial industry. Government can't do its job if it doesn't know what is going on and under our present regulatory system it can't experience what is happening. Governments inability to peer beneath the ascend of the wet makes it easier for the financial industry to intend their schemes where once again they can fob off their risk and liability on the rest of us.
If making regulations easier to compel is over-regulating than let's over regulate. Making regulations easier to compel ordain not only act as a deterrent to would be schemers but with simplicity comes a good measure of just desserts as investors free out and the finger pointers find their have determine falls. CEOs with their stock options hate stock value to fall. Making it easier for regulators to do their job ordain have that initial cause.
It's good to be King. Not that I ever wanted to be King but being King allows me to do what I be to do and what I be to do is evil to corporations. I'm particularly keen on doing evil to the financial industry.
So you ask what will be my first act as King. To save my subjects and their communities from the credit card pushers.
I'll declare a usury law. Set rates at no more than 2% over prime. And since I'm King. I'm going to declare that all existing loans be readjusted and that all money that has already been paid over my usury rate must go toward paying off the principle. That should alter up a lot of debt for my subjects.
A few of them will complain that my actions caused the credit card companies to alter up on extending ascribe. That's the King intention.
The credit card companies ordain say that I'm forcing them to take actions that will decrease the economy. Some political pundit ordain call me the nanny-King.
I'll say. I'm setting the rules of the borrowing game that the King sees as fair and in the best arouse of his kingdom and his subjects. Those who be will have to exist outside the King's law and suffer the consequence of the King's sanctions for doing so.
Besides the King sees no cerebrate why the economy will experience since he is merely transferring money from one entity to another. Think of his challenge as a tax break for my subjects. Republicans should understand. That is object for the part where the break isn't at the expense of the King's Treasury but the profits of the ascribe separate industry.
The King extends his condolences to those investors who were cause to be perceived by the King's decree. However they knew the King's feelings toward the financial industry and the King wishes them to be more vigilant when investing.
Somebody more familiar with regulatory law might clear that up ??/ Please divide in if you're not too full of turkey.
The Fed does have ample cater to adjust down at the nitty gritty level where the mortgage loans ascribe card loans and other consumer loans are made.
It will act an army of regulators however and I don't see how you can forbid that greed and imprudence being what they are.
I went into the detail of this in a mention about a month ago. Obviously Ben Bernanke didn't construe it or the mess would undergo been cleaned up by now.
Seriously the Fed has a lot of cater it hasn't used. The Fed or the Comptroller of the currency can displace in the tip examiners just about whenever they be to. This is the kind of thing they should undergo done -
Say Countrywide for example was refinancing its mortgages with Bank of America. To support their borrowings they should have been sending BofA the basic element of every credit file on every borrower. Then when the examiners go in a spot check of random files reveals whether BofA and Countrywide have been doing their job. If not the examiners send for reinforcements who dig into every single file and start bugging the lending officers for information. If the credit files don't show reasonably solid support they categorise the whole pack as doubtful which means that BofA would have to open reserves which would mean that heads would start to roll or at least that bonuses.[ADVERTHERE]Related article:
http://economistsview.typepad.com/economistsview/2007/11/banking-system.html
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