good st wall

http://news.yahoo.com/s/ap/20080331/ap_on_bi_ge/fed_overhaul

What the hell?

Insurance and banking are generally regulated on state levels. The idea that a federal mandate was necessary or would have averted the present mortgage crisis is ridiculous. What might have helped the mortgage crisis was a simple piece of paper describing the loan terms in English, but that isn’t listed as a prospective change here anyway. I’m not sure what insurance companies were doing wrong that they need federal oversight. Maybe health insurance. They already got bail-outs from the fed after Katrina and other disasters. There again the same crime of not offering a simple explanation of terms probably is the key issue (anyone ever read their policies?)

The primary problems with the financial industry as a whole is similar to the crisis of doctor malpractice suits. Explain things in English (or whichever plain language we’re referring to). End the insistence on mystical and arcane language and focus .. and critical elements that any client would have to deal with. None of that is something that can be reasonably fixed by federal activity and is in fact more likely to be impeded because federal mandates will impose importance on issues that may be irrelevant or insignificant in particular cases, destroying the ability of advisers to offer flexible and actionable advice (look what HMOs have done to medical care, same concept only the government instead of the insurance companies). The only good news of these proposals is that they will likely remain delayed in committees and there to die by the hand of the financial lobbyists. It’s possible the Democrats will try to pass some elements, but they’ll undoubtedly wait until November unless they’re up for a contested re-election (likely considering Congressional approval ratings). The language of the key Dems in the story suggests even this is unlikely (if only because they want STRONGER regulation, idiots).

On reflection, it does appear to consolidate what are now inter-agency tasks into more powerful agencies. I’m not sure if this is necessarily good or bad yet, it’s less confusing, but it’s unclear if whatever regulation is offered will be effective or meaningful. My initial read is that this is probably ultimately good for business and investment (by removing overlapping regulatory agencies) by essentially regulating de-regulation. That’s the good part.. the bad part is that it creates new regulation over industries that aren’t directly involved in the ’mortgage crisis’, which I don’t understand the point of doing so (unless it’s a measure to streamline competition by destroying vast intrastate barriers, especially in health insurance. Property insurance or car insurance seem best left to state authorities). Most of the agencies that are being gutted are banking or investing related (SEC/OTS/CFTC). It is true that some sort of oversight is needed for these industries, but most states already possess some sort of sentry duty for this purpose. Expressing pressure for states to move in certain directions would be sufficient, expanding the power of federal government does not seem like the appropriate response to the problem. The problem is caused by inappropriate actions taken by both lenders and lendees, etc. Communication between these groups must improve, which regulation does not guarantee will happen.

Other note. The stock crash in 29 didn’t cause the Great Depression. I wish people could figure this out. What caused the Depression was in fact the banking crash in 32. This was related to the stock crash because of the money banks and margin buyers through banks investing.. but until confidence in the stability of banks and loans collapsed, the economy was still reasonably vibrant. Why the media somehow imposes this magical power on the ups and downs of the market upon the economy as a whole makes no sense. Probably because they don’t understand the economy anymore than anyone else does and figure these numbers must mean something so they’ll report on them. In fact the market going down caused more Americans to become rich than had ever been true before in America (stocks became so undervalued that people could purchase huge amounts when they went back up). But without stable banks to entrust the money to, that’s a real problem. Stock is an intangible asset, it’s supposed to rise and fall as people decide whether it’s more or less valuable. Money is basically an intangible agreement.. once that agreement is set aside economies stall (or fail to expand, looking at some developing countries).

Curiously, CNN didn’t even have this as a story anywhere on the front page.
I found this an intriguing political point: "It’s probably a bad idea to spend too much time debating the organization of the fire department while the fire is still burning and no independent investigation of the cause of the fire has yet been completed" The basic problem and reason this won’t really get much play is that Democrats have already ’established’ the ’cause’ as big bad business and will insist on regulation to ’control’ those businesses (even though such regulations inevitably favor those businesses against new blood and are eaten away at the margins by back-scratching tax breaks or other methods). But the central point is that the re-organization of federal and state agencies who should be attempting to work with banks and other institutions to come up with appropriate responses to consumer complaints is a waste of time and a diversion of resources. I disagree.. because I’m not convinced that the regulatory agencies can really do much of anything to avert the ’crisis’ anyway, but that’s a different story.