According to the New York Times, a Treasury Department plan released (over a weekend to the press and selected insiders only) would give substantial new power to the Federal Reserve Board. "The Treasury plan would let Fed officials examine the practices and even the internal bookkeeping of brokerage firms, hedge funds, commodity-trading exchanges and any other institution that might pose a risk to the overall financial system." This would be a significant expansion of the central bank’s regulatory mission.
We are not, at this point, opposed to this effort. We noted, in an October 2, 1998 filing with the DC Circuit of the US Court of Appeals (Case Number 98-1459), our belief that the Fed should be designated a "Super-regulator, with broad responsibility for overseeing the activities of banks, thrifts, pension funds, insurance companies, mutual funds, brokerage firms and investment banks.
We believe social investors need to review the plan carefully. The Times stated:
"The proposal is part of a sweeping blueprint to overhaul the nation’s hodgepodge of financial regulatory agencies, which many experts say failed to recognize rampant excesses in mortgage lending until after they set off what is now the worst financial calamity in decades." (This is, of course, false. Financial regulatory agencies recognized "rampant excesses in mortgage lending" (see: Irrational Exuberance) but were unable to take the steps required to protect the financial system.)
Treasury's plan calls for the consolidation of "banking and securities regulators into a powerful trio of overseers responsible for everything from banks and brokerage firms to hedge funds and private equity firms."
Further, "the plan does not recommend tighter rules over the vast and largely unregulated markets for risk sharing and hedging, like credit default swaps, which are supposed to insure lenders against loss but became a speculative instrument themselves" and it "reduce the power of the Securities and Exchange Commission" while merging the S.E.C. with the Commodity Futures Trading Commission.
We are not, at this point, opposed to this effort. We noted, in an October 2, 1998 filing with the DC Circuit of the US Court of Appeals (Case Number 98-1459), our belief that the Fed should be designated a "Super-regulator, with broad responsibility for overseeing the activities of banks, thrifts, pension funds, insurance companies, mutual funds, brokerage firms and investment banks.
We believe social investors need to review the plan carefully. The Times stated:
"The proposal is part of a sweeping blueprint to overhaul the nation’s hodgepodge of financial regulatory agencies, which many experts say failed to recognize rampant excesses in mortgage lending until after they set off what is now the worst financial calamity in decades." (This is, of course, false. Financial regulatory agencies recognized "rampant excesses in mortgage lending" (see: Irrational Exuberance) but were unable to take the steps required to protect the financial system.)
Treasury's plan calls for the consolidation of "banking and securities regulators into a powerful trio of overseers responsible for everything from banks and brokerage firms to hedge funds and private equity firms."
Further, "the plan does not recommend tighter rules over the vast and largely unregulated markets for risk sharing and hedging, like credit default swaps, which are supposed to insure lenders against loss but became a speculative instrument themselves" and it "reduce the power of the Securities and Exchange Commission" while merging the S.E.C. with the Commodity Futures Trading Commission.