breaking from iran for a moment

Much as I've been riveted to the blogosphere on Iran, there are a few things happening in American politics. Like this

And Obama also gave a rather nondescript account of health care reforms. Which I've read but haven't had time to consider. By which I might mean: consult with the doctor in the family. I am still more impressed with HAA instead of this at first glance. But the new financial regs, I can look over really quickly and decide on.

1) New regulatory agencies. I'd rather they consolidated the agencies they have already instead of create new bureaucracies. The interconnected or overlapping nature of most financial institutions now means that they should be regulated more based on their actual activities instead of a name plate. As such, you're better off having a few agencies with more agents per building basically. Right now we already have alphabet soup. And to my way of thinking, MORE regulatory agencies for compliance means BIGGER banks. Which looks to me like it was part of the problem. They did at least want to establish a super regulator overseeing the gaps, but we'd also benefit by a consolidation of regulations.

2) Nothing in there about breaking up the superbanks. This will happen in some respects anyway, simply because it hasn't been shown that getting bigger and bigger as a bank really helps the bank itself and the two biggest dogs are both looking like they expanded too fast and have to now sell off parts. But realistically, if a bank, or any company, gets "too big to fail", it's too big to exist. That seems to be part of the nature of the anti-trust regulations that we adopted in the early 20th century, with the idea that a towering corporate structure would get so large that if it had a problem it would paralyze the general economy. This is no less true when the resources that a corporation provides are financial instruments and credit for lending purposes than when its purpose is distributing coal or oil. It's possible you can sidestep this with a bank by having stronger reserve requirements for larger banks, which essentially limits their size anyway by increasing the competitiveness of smaller banks.

3) Consumer Financial Protection Agency. I have mixed feelings on this. Going back to the credit card bill they passed earlier in the year, there were certainly some egregious things that they put a stop to (at least by law), so there's some use in proper regulation and oversight of business practices. And I could agree there's merit in having a consumer watchdog in government, or at least give consumers a seat at the table to lobby alongside everyone else. But the idea does sound an awful lot like NRA from the 1930s, in the sense of attempting to control rates, in this case on mortgages and credit card lending, back then on just about everything else. I'm not sure how it works precisely, one will have to wait for the actual legal text in Congress to see how it plays out. But if it's actually like NRA, this thing should die immediately. We don't need price fixing to resolve the problem.

What we really need is an idea of how much to price some of the worthless stuff still on the bank's balance sheets. If we can do that, they can figure out how much they really have to loan out with greater ease. Somehow this got pushed into the background when it was all along the most pressing issue.


Update:

1) Give the federal government power to take over and wind down a large financial company. --- Good, why this wasn't covered by LAT I don't know. It's probably the most important aspect of the regulation.
2) Mandate that large financial institutions raise more capital and meet higher liquidity standards. - And good, second most important.
3) Abolish the Office of Thrift Supervision and create a new national regulator for financial institutions. - Huh... why abolish one just to replace it?
4) Require advisers to hedge funds and other private pools of capital to register with the Securities and Exchange Commission. - Transparency over derivatives looks like the target here when combined with later provisions. Good idea.
5) Suggest there be some sort of federal coordination of insurance regulation. - Standardization, things like apples to apples comparisons, would be helpful.. but at the moment, this is done by states. I suppose the interstate commerce clause is useful on occasion.

Still nothing in there about market valuation of toxic assets though.