Tim Geithner has announced a "plan" to overhaul financial regulation. According to him, the changes are needed to fix a system that is badly flawed. Of course, we had no idea that the system was as messed up as it is until this current financial crisis -- and now we understand. Thus, he doesn't want any modest change... he wants a complete overhaul. "New rules of the game."
Basically, what he's calling for is a new governmental agency (we need another one of those like another hole in the head). This agency will be responsible "for systemic stability over the major institutions and critical payment and settlement systems and activities." Translation: the federal government does not currently have power to seize whatever they please and Geithner would like to change this, please.
According to Geithner, the changes called for are "very complex, very consequential, very difficult." Ooookay. And apparently they're too complex and difficult for his wee little mind to grasp because he didn't divulge any details (this is fast becoming a trademark for him) but said that the proposals will be outlined over the coming weeks.
And here's a tidbit that should put everybody's mind at ease: Barney Frank is still the chairman of the Financial Services Committee. Yes, this is the same committee that oversees Fannie and Freddie. This committee "oversees all components of the nation's housing and financial services sectors including banking, insurance, real estate, public and assisted housing, and securities." Barney Frank has said that it's clear... we need better options than allowing Lehman Brothers to fail or pumping billions into AIG. He says that they are looking for alternatives to avoid those "polar extremes." OH! I'm so glad he's on it.
Representative E. Scott Garrett (R, New Jersey) made a statement that any authority given to the government to take over failing institutions would need to be carefully structured "to avoid a lot of unintended consequences." Forget the unintended consequences! What about those intended? Or is he just being nice in trying not to accuse his fellow congressmen of a massive power grab?
Geithner is hoping to work with Europeans on a "global framework, a global infrastructure which has appropriate global oversight." He doesn't want a "balkanized system at the global level like we had at the national level."
They're going for government power to look at the inner workings of companies. If the regulators decide that a company has become "too big to fail," then they would begin to impose stricter capital requirements and closer scrutiny of its activities. They want to regulate private capital as well. And here's where it gets really interesting: Under this proposal, hedge fund, private equity and venture capital fund advisers would have to register with the S.E.C. (These are the companies which handle investments of the very rich.) They would be required to provide the government information on how much they borrow to leverage their investments as well as information about their investors and trading partners. And then the S.E.C will share those reports with the new "systemic risk regulator."
They're going after the people with the money. I'm still not sure what it is they're trying to accomplish with this, but I can guarantee you that it isn't good. Hedge funds haven't been at fault in this current financial mess... it's been the result of poor judgment in mortgage lending and financial investments tied to subprime mortgages. (Hello, Fannie and Freddie -- and Barney Frank.)
And it isn't that hedge funds aren't regulated already. They are. There are laws and rules that apply to this sort of investing that would certainly leave me out of qualification for participation.
Geithner has said that time is of the essence in implementing this restructuring. He says, "We have a moment of opportunity, we need to act." Sound familiar? Never waste a good crisis... But he is also saying it's important to have an international effort to reform the global financial system. In one sentence he says that the US will work with Europe because we cannot move alone... and then he said, "We cannot wait for consensus with the rest of the world." I'm not really sure what to do with that -- but that's par for the course these days.
All I'm patently certain of is the government is on a massive power grab. The current administration doesn't much care for the producers and money makers in our society. And everybody should be on the alert for further infringement on freedom and capitalism.
Oh - and, as always, hold on to your wallet.