As usual, Barry Ritholtz endorses common sense.
• Federal Reserve should set monetary policy, not regulate banks.(They’ve demonstrated they are incompetent at the latter)
• Treasury should over see taxing and spending policies, executing that via IRS, Mint, etc.
• The FDIC, the entity in charge of insuring the banks deposits, should make sure these banks don’t blow themselves up
Won't happen, but hey! That's Gummint.
Sounds reasonable. That being said, oversite of "Too Big to Fail" Institutions, regardless of who's doing it, isn't going to be enough. Josh Rosner does a great job of pointing this out here:
ReplyDeletehttp://www.ritholtz.com/blog/2009/10/congress-and-tbtf-%e2%80%93-bring-in-the-bomb-squad/
Bottom line, TBTF institutions cannot continue to exist in their current form. But, of course, doing the right thing would require Congress to bite the hand that feeds them and their campaigns.
Right now, the most influential Congresscritters FOR the Banks are Frank and Dodd.
ReplyDeleteDodd may bo away soon.
By the way from your link:
ReplyDeleteAs part of this Japanese-style kick-the-losses-down-the-road kabuki drama
Applies to MUCH worse situations, too--like SocSec and Medicare.
...and unfortunately, the only solutions to each one of these crisis' involves massive tax increases and better fiscal discipline (after we get through the current financial/economic crisis that is).
ReplyDeleteConservatives better understand that tax increases are as unavoidable as fiscal restraint in the near future (and liberals the opposite). There is no other alternative.
BTW, make sure to catch the Fergeson/Rogoff discussion that Ritholtz links to. I caught it live the other day and I can tell you the first 20 minutes of the discussion are fantastic. They talk at length about this issue. FYI.