In one of the great Dilbert cartoons, the staff isassembled to hear a product pitch from a potential vendor.
After everyone is through speaking, Dilbert asks one ofthe visiting executives exactly how their product works.
The vendor team replies by casually telling him theydidn't bother to bring the product manager to the gathering.
The president's sweeping announcement of financialregulatory reform sort of harkened back to that 20-year-old strip, wherethere's a lot of broad-based material but it's woefully short on what Iconsider "achievable particulars" and, in truth, long on recycledideas.
For example, Obama's plan includes the formation of aConsumer Financial Protection Agency that would be imbued with broad powers togenerally oversee consumer lending practices as well as mortgage and creditcard abuses.
I won't approach the absurdity of creating yet anothergovernment agency to protect consumers to replace ones that, were, well,there to protect consumers, as that isfodder for another column. But consider the costs and complications thatanother layer of bureaucracy will create for smaller financial institutions.
But I'm curious as to why there's next to nothing in thepresident's 89-page outline that addresses two of the primary causes of themortgage and credit meltdown - Fannie Mae and Freddie Mac. It simply indicatesthat it will study the issue more closely. Together these government-sponsoredentities purchased more than 40 percent of subprime securities during thatmarket's peak, while estimates have pegged potential taxpayer losses as aresult of the systemic failures at both could total $300 billion. Nor does itbegin to address the culpability of government agencies like the FederalHousing Administration pushing unsustainable loans to deadbeats who couldn'tbegin to meet the payments.
Then there's the question of giving the Federal Reservemore authority to define and oversee the financial institutions "too bigto fail." Now let's pretend for 30 seconds I'm not a banking regulator,but I was taught that the Federal Reserve's primary job was to monitor the U.S.currency system. Besides, I'm not too convinced the Fed did a bang-up joboverseeing banks before.
And what happens under this plan to the FDIC and itschair Sheila Bair? For several months, Bair has been jockeying for herorganization to be granted more authority over the larger financialinstitutions, claiming that unlike the Fed, it has no conflicts of interests asopposed to being partially owned by a number of the banks it oversees.
It will also be interesting to monitor what happens tothe regulatory powers of the Securities and Exchange Commission down the road,although a potential consolidation with the Commodity Futures TradingCommission appears to have been shelved by now.
I'm not going to say that reform is unnecessary, but onehas to wonder what would have happened had all the people at agencies mandatedto enforce and regulate, had, say, reformed and regulated.
What we need now is someone to bring the product manager to explain how allthis is going to work.
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