It would have been nice if all the regulatory agencies (The Federal Reserve, SEC, the Comptroller of the Currency, FDIC) and the government approved rating agencies would have done their job before the current financial crisis. Of course, I think it’s ridiculous that the very people that helped drive Fannie Mae, Freddie Mac and all of the investment banks to ruin are sitting around grilling Paulson--for example, Chris Dodd.
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The idea of letting Paulson have the funds with no oversight sounds horrible - until you consider who would be available to provide oversight. Paulson's old company is among the strongest out there, which is why Warren Buffet just invested in it. Congress on the other hand contributed mightily to the mess with ill thought out securities regulations, pushing "affordable" housing for those who really couldn't afford it, and a cozy relationship with the GSE's lobbyists for the last 30 years. If the choice is between Barney Frank and Hank Paulson running the show (assuming there has to be a show), I'll go with Paulson.
I have to respectfully disagree with the first part of your post.
"It would have been nice if all the regulatory agencies (The Federal Reserve, SEC, the Comptroller of the Currency, FDIC) and the government approved rating agencies would have done their job before the current financial crisis."
Actually, they did, and that has contributed fundamentally to the current situation.
cf.
Ron Paul on Crisis
"I am afraid that policymakers today have not learned the lesson that prices must adjust to economic reality. The bailout of Fannie and Freddie, the purchase of AIG, and the latest multi-hundred billion dollar Treasury scheme all have one thing in common: They seek to prevent the liquidation of bad debt and worthless assets at market prices, and instead try to prop up those markets and keep those assets trading at prices far in excess of what any buyer would be willing to pay."
and my own series on the subject.
That's freakin pathetic! Dodd needs to recuse himself. He has no right to be on this committee.
Congress screwed this up - and - we don't need them to be meddling in it any more.
Jeff - gonna have to disagree with you - there was no oversight. The FEDS have been messing with interest rates keeping them unnaturally low - which caused this mess when they started raising rates again. If there was oversight - Fannie and Freddie would not have failed either. Unless - you are talking about their liberal policies that created the problem..but..I still wouldn't call that oversight.
Bobo,
We are on the same page, just using different language.
To a degree, I was being sarcastic, but perhaps that wasn't clear. More basically, the Federal Reserve, for example, was doing its job - of attempting to 'stabilize' - which was a major contributor to the debacle. I don't call such policies liberal, but I understand and agree with what you are saying.
As I suspect you would agree, asking the Feds to exercise oversight of the financial markets is beyond asking the fox to guard the henhouse, it is turning over to them the deed to the farm. (They, and the Treasury, are now trying to make the deal official.)
See my blog (Shaving Leviathan) for a brief (and incomplete) history of 'the crisis', which is the first installment of a planned 7-part series.
Regards,
Jeff Perren
I'm not commenting about the Paulson video, but I'm just commenting on what's going on in the Financial World in general.
I still don't know how all of these big Wallstreet companies that are supposed to be the experts in the world of banking and finance have crumbled to the ground. Unless the invested monies were pulled out in masse, the invested monies should still be there to stabilize the downturns of those companies. It's not like every single homeowner in the U.S. has his/her home foreclosed or every single investor has withdrawn his/her investment out from these institutions to really do damage to the financial market.
Let me know if my assessment doesn't make sense. I know that I know didly about the financial world, but that's my take on it anyway.
Tom: You make a good point. I too would choose Hank Paulson over Barney Frank.
Jeff: You are right. The regulatory agencies cause more problems than they ever solve.
Bobo: Chris Dodd is prime example of a big government crony.
Tasha: Read this short article by Alan Reynolds from the Cato Institute. It's very informative. The issue with these companies is that their bundled assets have dropped so low in value that shareholders and banks have been spooked. Your instincts are correct that if the assets are held long enough, they may rise in value eventually. But current accounting practices force these companies to claim losses.
I think there's already been too much oversight. What they need is supervision.
Sorry for the pun -- hope you don't mind. i know it's serious business, but maybe a little laugh can be helpful?
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