TuTu Monroe
A Realist
MARK A. CALABRIA NY Post
Obama: Would actually increase risk from "too big to fail" banks.
Last updated: 5:56 am
June 18, 2009
Posted: 2:59 am
June 18, 2009
THE Obama administration yesterday presented a misguided, ill-informed remake of our financial regulatory system that will make crises more likely and more costly. Our financial system, particularly our mortgage system, is broken -- but the Obama plan ignores the real flaws to focus on more convenient targets.
Instead of putting an end to bank bailouts, the plan makes bailouts a permanent feature of our regulatory landscape. In fact, it extends the possibility of taxpayer-funded bailouts to any company choosing to become a financial-holding company. This will likely include every large insurer, as well as major consumer-finance companies like GMAC.
Of course, the administration tells us that bailouts won't be needed -- because the same regulators who missed the signs of the current crisis will get added powers to prevent the next one.
We're supposed to believe that, if only the Federal Reserve had the same oversight powers over AIG as it now has over Citibank and Bank of America, that the bailout of AIG would have been avoided. Just think: If only AIG had been managed and regulated as well as Citibank -- because Citi is in such great shape now.
In the wake of this crisis, it's understandable that the Obama plan increases regulation and oversight of the largest financial institutions -- but why do it in ways that reduce the market discipline on those same companies?
By assembling a list of institutions deemed "too big to fail," the president is announcing that any of these select corporations will be bailed out if it fails. As a result, these institutions will face lower funding costs than smaller lenders -- which will allow them to gain market share.
That is, the Obama plan guarantees increased concentration of our financial markets: We'll have fewer banks, but larger ones -- insulated from market pressures.
In short, the Obama plan puts the entire safety of financial system on hoping that regulators at the Fed get everything right.
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Obama: Would actually increase risk from "too big to fail" banks.
Last updated: 5:56 am
June 18, 2009
Posted: 2:59 am
June 18, 2009
THE Obama administration yesterday presented a misguided, ill-informed remake of our financial regulatory system that will make crises more likely and more costly. Our financial system, particularly our mortgage system, is broken -- but the Obama plan ignores the real flaws to focus on more convenient targets.
Instead of putting an end to bank bailouts, the plan makes bailouts a permanent feature of our regulatory landscape. In fact, it extends the possibility of taxpayer-funded bailouts to any company choosing to become a financial-holding company. This will likely include every large insurer, as well as major consumer-finance companies like GMAC.
Of course, the administration tells us that bailouts won't be needed -- because the same regulators who missed the signs of the current crisis will get added powers to prevent the next one.
We're supposed to believe that, if only the Federal Reserve had the same oversight powers over AIG as it now has over Citibank and Bank of America, that the bailout of AIG would have been avoided. Just think: If only AIG had been managed and regulated as well as Citibank -- because Citi is in such great shape now.
In the wake of this crisis, it's understandable that the Obama plan increases regulation and oversight of the largest financial institutions -- but why do it in ways that reduce the market discipline on those same companies?
By assembling a list of institutions deemed "too big to fail," the president is announcing that any of these select corporations will be bailed out if it fails. As a result, these institutions will face lower funding costs than smaller lenders -- which will allow them to gain market share.
That is, the Obama plan guarantees increased concentration of our financial markets: We'll have fewer banks, but larger ones -- insulated from market pressures.
In short, the Obama plan puts the entire safety of financial system on hoping that regulators at the Fed get everything right.
VIEW FULL ARTICLE >PAGE 1 2 CONTINUE
