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The federal government is a step closer to having vast powers over financial services firms. The U.S. House of Representatives Financial Services Committee voted on Wednesday to give regulators the authority to carve up financial firms when economic stability is at stake. The bill would also open up the Federal Reserve to much more congressional oversight. This comes more than a year after firms such as AIG (AIG) and Citigroup (C) needed profound financial intervention to prevent a broad collapse of the global economic system.
Of course, the measure is getting mixed reviews. The Independent Community Bankers of America, a lobbying group for smaller entities, says it will "create a more equitable financial system and hold too-big-to-fail firms accountable for the risks they pose." Meanwhile, the Financial Services Roundtable, which represents larger banks, such as Bank of America (BAC), says it will "stifle creativity and the free-flow of ideas and capital."
The House bill would try to keep the financial community from having to relive the risks of "too big to fail" that come from large, multi-functional international financial services institutions. If the financial institutions covered do wind up in trouble, it provides a resolution process for orderly remedy (including shutdowns) that would ease the impact on investors and markets.
An amendment to the bill would require the Federal Reserve to submit to audits of its monetary policy, a first for the institution. Chairman Ben Bernanke says that this requirement would compromise the Fed's independence and that it could worry investors.
The House committee also voted for a bill that would create a federal office to watch the insurance industry, though it wouldn't regulate it. The new Federal Insurance Office would fall under the Treasury Department and could recommend an increase in regulation for insurers that may be introducing too much risk to the economy. Currently, insurance regulation occurs on a state-by-state basis.
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Reader Comments (Page 1 of 1)
12-03-2009 @ 12:41PM
Robert Prince said...
The great virtue of freedom in the market place is allowing people to fail. Fascism, whether in Mussolini's Italy, Hitler's Nazi Germany or the United States today, is slavery.
12-03-2009 @ 4:59PM
william lindblad said...
After only a few moments of review I conclude that this proposed bill is worthless.
The proposal is to "give regulators", and that is the key.
Does anyone know how much Federal and State Oversight presently exists on markets and finance? If you know the answer than you also know that this move is nothing more than an effort to make useless, more useless. Actually, since the House Financial Services Committee has proven themselves worthless, I really fail to see why this, and it's counter part in the Senate, even exist, no less meet. These members are supposed to be up on finance and banking and I am sure that they return to their respective districts at least occasionally. These people are mostly long term politicians and yet they could not see all of the unbridled boom building and all of the cheap money advertising. Nothing down, no closing costs, 120% finance, no credit checks, no income verifications, etc. Pretty obvious that they saw nothing wrong. As they oversee the regulators there was no reason for any regulators to cry wolf. Yet two did. Two got the ax.
It only shows that our leading politicians do not represent the interests that elect them, nor did those sitting on these committees understand finance or even simple economics. I still wonder why Larry Summers is still a Presidential adviser and this makes me wonder about the man that appointed him. Considering that Greenspan, Rubin and Summers are their devout Libertarian views are directly responsible for all present economic chaos. They are the creators of all of our massive debt and yet, are lauded as financial wizards.
Yeah, we need more agencies like OFHEO, the SEC and the commodities commission. We need more State banking regulators. We definitely need more HUD Secretaries that know how to keep their mouth shut and not say that something is wrong.
Anyone that believes this should stay home on election day 2010 when most of those responsible will be up for re-election. All who believe the opposite should get out and vote, even if the opponent is Donald Duck.