Another vote against a super-regulator
Edward Harrison has an interesting and worth-reading take on financial reform :
I propose the following:
- Shelve any talk of a super-regulator. It is a dangerous idea that will prove both politically unpopular and ineffective.
- Enforce the regulations that currently exist. For example, anti-trust law should prohibit any institution from holding more than 10% of banking assets. Another example is the Home Owner Equity Protection Act of 1994, which gave the Federal Reserve the authority to stop abusive mortgage lending practices.
- Promote smaller community banks. The Bush and Obama Administration’s policies during this crisis have favoured big banks. Meanwhile, community banks are being held to a disadvantage in access to cheap capital. Why doesn’t the FDIC spin off seized assets as small community banks with new leadership instead of gifting them to private equity or other banks?
- Regulate OTC derivatives. Full-stop. No clearinghouses. No loopholes. We need an exchange-traded OTC derivatives market. (listen to the audio at the bottom of this post to hear how lobbyists gutted the OTC derivatives regulation in Obama’s reform package).
- Keep the Consumer Finance Protection Agency. If we want any new regulators, this is where we need them. The Fed failed to protect consumers from abusive mortgage lending practices and there is now a balkanized regulatory structure to oversee consumer protections. The CFPA would change this.
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