Wednesday, September 03, 2008

Should the Fed really "rule the world"?

Perhaps the Fed comprises the “masters of the Universe.” That is the view of Roger C. Altman, deputy Secretary of the Treasury during the first Clinton Administration. Today (Sept. 3), in the New York Times op-ed pages, he provides a perspective “How the Fed Can Fix the World,” link here. His take is rather straightforward. The Federal Reserve, he notes, bailed out Bear Stearns in March of this year, even though the Fed doesn’t directly regulate “investment banks”, mortgage companies (read: subprime) and hedge funds. But it had to step in and take over anyway, and kind of “adopt” at least one investment bank. He also notes that regulation of other entities is done by too many agencies, including the Comptroller of the Currency, the FDIC, the PBGC, the SEC, the CFTC, the Office of Thrift Supervision, and the Office of Federal Housing Enterprise oversight. He maintains that the entire paradigm for financial regulation needs to be restructured, maybe under the Fed (even more power?), and that Wall Street might not like it and traders might see their profits and incomes take a hit, but we would wind up with a system that is much more stable.

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