posted on Aug, 6 2009 @ 04:32 AM
So, I was watching Cspan coverings on Tuesdays senate panel discussing with the Federal Reserve, FDIC chairperson, and the Comptroller of the Currency
.. (I know.. I was bored)
One question posed by Sherrod Brown (D-OH) to the panel present was: Why the strife between regulatory agencies on "turf" (power), and
specifically.. why this fighting over Obama's plan?
A rather simple question, but Sheila Blair gave an interesting (albeit, long winded response and by the red glazed over look in Brown eyes I don't
think he understood any of it...) response.
This is all in regards to Timmy the Tax Cheat having a temper tantrum in front of Blair, Bernake and other agencies..
Obama's plan is basically to take a rather significant amount of power away from the Treasury, the FED, the FDIC, and most likely quite a few other
agencies.. and create a brand new agency called "Consumer Financial Protection Agency"
So we would have the following:
All monitoring basically the same entities.. the problems being that the more bureaucracies that are created, the bigger the loop holes the more
likely another major discombobulation of the financial markets is to occur.
I actually side with the Federal Reserve, Treasury and FDIC on this one.. Blair put it quite nicely:
The problems that arose around massive credit expansion and the creation of the Housing Bubble came about, largely, from non-regulated (or at least
The Federal Reserve, Treasury and FDIC all monitor, regulate and insure BANKS, and Bank Holding companies..
The biggest players in the financial collapse were companies like Country Wide Home Loans, American International Group, General Electric Financing,
and various other funds, investment holding companies, mortgage brokers and insurance companies.
The agencies listed above, for the most part, do not regulate companies like this.. In fact, it turns out, aside from the SEC, apparently no body
regulated these institutions (except Insurance, which State insurance boards should have been investigating, as per AIG, that's the State of New
Let's take Country Wide as an example. Country Wide originates Home Loans, for the most part ... the lent more money for sub-prime mortgages than
anyone else.. and usually sold the mortgages to either other banks or GSE's like Fannie and Freddie. But country wide did not have deposits .. thus
they were not regulated by the FDIC. They were a bank, or bank holding company.. thus they were not regulated by the Federal Reserve, nor the
Treasury. They were not trading or investing in other peoples money, just selling mortgages, thus they were not regulated by the SEC. Who regulated
them? No body, or at least.. no one is taking responsibility if they were. When it came to light Country Wide had absolutely no cash, bankrupt, and
used illegal methods to originate mortgages, the company promptly collapsed.
Some companies like General Electric (which took a $140 billion dollar bailout) was also not a bank, bank holding, or deposit institution ..
unregulated. It came to light too that they were giving credit to anyone and everyone .. GE had to transform their finance arm into a Bank Holding
company to receive funds, and become regulated by the Federal Reserve.
American Express: Same story. No regulation because they were outside of the perimeters.. they converted into a Bank Holding to be regulated and
AIG, being an Insurance corporation was also not regulated by the FDIC, or FED, or Treasury.. they were regulated by the SEC .. which ... failed. to
say the least. Which smells of corruption, or stupidity, or both. The SEC is a very strict regulator, to anyone who has ever had their Series
6-7-whatever license can attest. They failed with Bernnie, they failed with AIG .. One of the benefits of the FDIC and FED is they are not Federally
operated, immune to politics and such. Government Agencies.. not so much.
Obama wants to create a NEW agency to regulate apparently anything not being regulated.. the FDIC, Treasury (well it seems everyone but Timmy) and FED
are all saying "Hey, we can regulate these institutions with the systems in place.. we just need to be allowed to." Obama and co seem to be on a
mission to create this new entity. The new program would over see investment banks (which are not really banks) as well, and it should be pointed out
Obama's financial advisers are mostly ex-Goldman Sachs employees.. which are drafting the resolution to create the very entity that would regulate
them, as an investment banking company. Goldman was outside of most of the regulation agencies, as an investment bank .. they made much of their
wealth selling insurance securities on mortgages called Credit Default Swaps. These instruments helped bring down the largest banks. hmmm.
Hope that helps clarify Timmy the Tax Cheat's little tantrum, and perhaps the entire crisis as a whole.