More state intervention is always needed in a crisis
Silly season is back. As occurred several years ago with the mad rush to pass the disastrous Sarbanes-Oxley Act in the wake of the Enron collapse, Washington is preparing to use the imploding housing market as an excuse to ratchet up securities regulations. The trigger for a new round of rulemaking was the Fed's decision, as part of the Bear Stearns bailout, to allow investment banks to borrow directly from the discount window for overnight funding. Non-banks will now be able to get term funding from the Fed, pledging non liquid mortgage securities as collateral and getting US Treasuries in return. This has led both Democratic and Republican policymakers to agitate for increased regulation of investment banks, making it equivalent to that of commercial banks.
High profile free marketeers are seemingly unable to refute this logic, reminiscent of Sarbox. In a CNBC interview, Cato Institute chairman Bill Niskanen stated that more regulation may well be necessary to prevent the investment banks from unfairly gaming the system. He welcomed a new regulatory push by House Financial Services Committee chairman Barney Frank (D-MA), amid cackles of glee from the interviewers. Wall Street Journal editorialist Holman Jenkins has called for demolishing homes "with taxpayer money if necessary" in order to support real estate prices. Finally, economist Bruce Bartlett is calling for the repeal of $117 billion in tax rebates, instead giving that money to government-sponsored housing agencies (Fannie Mae and Freddie Mac) to prop up the mortgage market. Are we all Keynesians, now?
Comments (4)
Yes, from what I read over the weekend and into today, the groundwork has apparently been set for support of Fed oversight of Wall Street investment banks.
And everyone's cool with that, it seems. They also seem convinced that increased regulation via Federal Reserve oversight will solve future problems at investment banks.
From, "Bear and moral hazard" (FT Lex) http://www.ft.com/cms/s/1/4e16c884-f9da-11dc-9b7c-000077b07658.html :
"Moral hazard is returning to the fore. When the smoke clears, the Fed must get its pound of flesh by regulating Wall Street, and doing it more aggressively, to make sure this never happens again."
Now that Bear Stearns has been the target of a Fed assisted bailout/rescue merger, the politicians and overstretched homebuyers are looking for their bailout to come as well. "Where's our $30 billion?", they demand.
Witness Hillary Clinton's latest plan to spend other people's money:
http://latimesblogs.latimes.com/laland/2008/03/hillary-on-hous.html
Published: March 25, 2008 1:55 PM
A mortgage superfund? LOL!!!
Published: March 25, 2008 3:38 PM
I seriously hope Clinton or Obama won't be elected. I find it hard to grasp their economic theories.
Published: March 25, 2008 3:48 PM
Hilary and Obama and McCain know nothing about economics comparatively. They would have to rely on "advisers" and we all know where that leads.
So who is left after the MSM has killed the chances of all the others?
Third party with a viable candidate? Many have changed their affiliation this election. So....
So who do you think would be good in that slot? Just who has the right formula to turn the world right side up again??
Published: March 26, 2008 2:34 PM