Federal Reserve or Super Regulatory Agency? … Neither
For those who understand what has happened in reference to regulators before and during the current economic crisis, the idea of taking authority and responsibility away from the Federal Reserve and placing it within a new super regulatory agency, as is being proposed, is ignorant, to be kind.
Ron Paul has it right when he introduced legislation which would require a complete audit of the Federal Reserve in order to see what deals they’ve been making, how they distributed money, and how they’ve been interacting with foreign governments and banking institutions.
Now that Paul’s bill has been pretty much gutted and useless (although Paul is attempting to get it reinstated with its original language), the idea of simply creating what would essentially be another Federal Reserve under a different name, but with evidently broader powers, is a futile attempt at trying to fix an economic system, that for the most part, hasn’t received the proper diagnosis yet.
This is shown in the introduction by Chris Dodd’s Banking Committee of 1,136 pages of draft regulations, which would basically transfer power from the Federal Reserve and the FDIC to this new supervisory, regulatory agency, which the sitting president and a board would appoint members to.
What the new agency would purportedly do would be to look for and find so-called too big to fail banks and then provide a thorough oversight of the financial institution. Supposedly a mechanism would be put in place which would help to wind down those financial institutions that aren’t banks in order to lower amount of money taxpayers would have to pay for to keep them afloat.
Just that last idea alone continues to show that this new agency is already set to fail, if it’s allowed to be created, as politicians continue to ignore the fact that taxpayers aren’t and shouldn’t be required to bail out businesses, and as long as that’s assumed to be an important part of the economic story, no meaningful changes will happen.
Here’s another couple of reasons we need to forget about the continuing drive toward more regulation, which has already been proven to have failed: those reasons are called Fannie and Freddie! Already these two government-backed entities have cost taxpayers about $112 billion to keep them going. Yet we’re being led to believe more oversight and regulation will change things?
Some in the government have been attempting to make it look like loose regulations have been a big part of the problem, but in fact the banking and financial industry, while admittedly had been loosed some concerning regulations, is still one of the more regulated industries in the country, and adding more regulations isn’t going to take care of what isn’t the real problem.
If you have a broken leg it isn’t going to help to have chemotherapy as a treatment for you. It’s not relevant and isn’t going to help you in any way. Yet that is precisely what is being done when attempts to create this new supervisory agency are being put forth.
Another thing to consider is the Savings & Loan crisis which generated tons of new regulations to keep something like that from happening again. You see where that got us.
So when Chris Dodd stood before the cameras recently and stated that the Federal Reserve, as far as protecting consumers and regulation were an “abysmal failure,” it’s laughable when taken in the light of Fannie and Freddie, along with the regulations instituted following the Savings & Loan crisis.
I am no defender of the Federal Reserve and believe they should be abolished, but not in order to create a new agency which will no doubt create the same problems by misunderstanding what the financial disease is.
What is that financial disease? It has been the monetary policies implemented by the Federal Reserve for decades, which isn’t even being talked about or focused on by those in government, even though Ron Paul, the most informed politician on financial matters and economics, continues to hammer at them and repeat over and over that this is the source of the past and existing economic problems we face.
Until monetary policy and the Federal Reserve become the real focus of our economic problems, nothing will be changed in any way, and we’ll be doomed to repeat this over and over again until they are.