Mission: Regulation Innovation
by Efin Advisor | June 22, 2009
On a mission to provide a new level of financial services safety, prevention and consumer protection, Treasury Secretary Timothy Geithner has presented a slew of changes to the current regulatory agencies, all with the goal of creating greater economic stability.
There are a few major changes that highlight the new administration’s goals. The first would be to give new powers to the Federal Reserve to monitor the largest American companies deemed “too big to fail.” This new capability on the part of the Fed is designed to prevent companies from having to be bailed out, or fail, both of which are dismal. Under the new plan, the Federal Reserve will be responsible for regulating and supervising at-risk companies, which will likely include not only major financial institutions, but also holding companies and other large commercial institutions.
What is expected to be the less controversial major aspect of the new plan is the creation of a new regulatory agency designed to protect consumers against financial services, a kind of Consumer Protection Agency for financial services, most prominently debt and credit. The new agency will represent a safety net to ensure transparency for consumers when taking out loans and using credit. Some of the expected regulations include preventing companies from selling mortgages and loans that are outside of an individual’s financial means, and requiring creditors to recommend the best loans for prospective borowers.
Do you think Congress will pass these measures? Should the Federal Reserve be given power to regulate specific businesses?
How can we possibly give the Federal Reserve more power? Alan Greenspan was one of the people who got us into the crisis we are in now (yes i know he’s not on the fed anymore, but it shows hwo they can cause problems) and the fed is incredibly unchecked. The members are on the board of the federal reserve for 6 years, and they essentially act iwthout any check on them. Why would we expand that power?
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Normally I would be opposed to the type of proposal Geithner and Obama are making, but, after this financial crisis and all the bailouts that have been given out, this current practice is clearly not sustainable. Finding solutions to help and regulate major businesses is the best preventative measure. As for giving this power to the Federal Reserve? Well, I can’t think of any body that would be better suited to do this, so it might as well be them
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I don’t see why we just don’t nationalize these industries. That way we would get all the profits from these companies and we can ensure a much more efficacious use of their resources and regulate them appropriately without stepping on anyone’s toes
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Rebecka Reply:
June 23rd, 2009 at 12:22 pm
You don’t see any potential problem with that? None, really? How about the amount of bureaucracy that would be involved in an important business? How about the fact that you take away profit motives because the money doesn’t go to the company or you? How about the apathy that has traditionally gone along with government owned busiensses? any of that ring a bell?
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I’m actually more concerned about the new regulatory agency than the additional powers of the Federal Reserve. Unless there is a very clear intelligible principle given in the creating bill by Congress, then via administrative law cases like Chevron v NRDC, this agency would have an extraordinary amount of power to determine their authority. This is especially harmful because even the perception of this occuring could cause a chilling effect in banking practices and a stifling of innovation (not to mention the abuses of power that could occur as well).
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