Tuesday, March 24, 2009

Haiku 032409

spring jackets

almost snowless
wet brown grass


Recently, we read the following:

Washington Post: "Geithner to ask Congress for broad power to seize firms, including non-bank financial companies"

“Treasury Secretary Timothy F. Geithner today told Congress the administration will seek unprecedented power to seize non-bank financial companies whose collapse could jeopardize the economy, a move Geithner said would have allowed the government to bail out insurance giant American International Group at a far lower cost to taxpayers. The government at present has the authority to seize only banks.

“Allowing the Treasury Department to take over a broader range of companies, such as large insurers, investment firms and hedge funds, would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president's Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators….”


And we thought:

…. This appears to address the seeming lack of a single, decisive locus of regulatory authority over financial institutions. As evidenced by the recent financial meltdown, the current financial regulation model, due to its inadequate oversight powers, engendered unbridled risk-taking and unscrupulous activities even by highly-rated and respected insurance companies, investment firms and hedge funds.

Geithner's proposed model should hence make messmongers think twice, we hope. It's a bit like students being better behaved and engaged when the principal manages his school by walking around and being visible -- and is perceived as personally involved. Hope the model's also been vetted enough to preclude unintended consequences….

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