Financial Overhaul Plan ?

Yesterday, I lamented that “So far, the Obama administration approach to bailouts has been to keep running Bush Economic Term III.” The reference was to the continuation of the Bush policies, by many of the same people involved in that prior, ruinous bailout approach.

Soon, we shall find out if Team Obama’s “Change we can believe in” is for real, or whether it is business as usual. The administration is set to release in mid-June a series of regulatory overhauls — call it “Re-Regulation” — of the entire financial system and the causes of the credit crisis and economic meltdown:

“All that — and more — is on the table as the Obama administration prepares to overhaul the regulatory apparatus that failed to prevent the gravest economic crisis since the Depression. Under consideration is a new agency to regulate mortgages and credit cards, as well as tighter federal oversight of hedge funds and insurance.” (NYT)

As you might have surmised, I have a few questions for the policy makers:

• Will the main economic advisors to the WH — Summers and Geithner — convince President Obama to cave in to the banking industry lobbying efforts?

• Are Derivatives going to be properly regulated, mandated as exchange traded products, transparently reported and required to have appropriate reserve requirements?

• Will Investment banks and Commercial (depository) banks be separated (a return to Glass Steagall)?

• Can the Fed continue its unprecedented power grab?

•  Will non-depository loan originators be brought under full Federal Reserve banking supervision?

• In the future, will compensation packages be based upon volume of risk assumed or on profitability?

• Why haven’t the largest shareholders — mutual funds, pension plans, and large institutional investors — upheld their fiduciary obligations to their investors? Why have the funds ignored issues of corporate governance, Boards of Directors, cronyism, etc.?

• Will iBank leverage be forced to return to historical norms?

• The excessive deposit concentration, with the majority of US checking and savings accounts held by just a few mega-banks be allowed to continue?

• Is “Too big to fail” going to remain the operative policy? When will “Too big to succeed” be recognized as a major problem?

• The FDIC is the regulator with the best track record in this crisis — will they expand their authority?• Is the SEC ever going to receive adequate funding and staffing to do their jobs? an we reverse a decade of regulatory neglect at the agency?

Here’s where the rubber meets the road . . .

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Previously:
Busted Banks Rebuff Regulation (June 1, 2009)
http://www.ritholtz.com/blog/2009/06/busted-banks-rebuff-regulation/

Source:
Administration Is Near a Financial Overhaul Plan
STEPHEN LABATON
NYT June 1, 2009
http://www.nytimes.com/2009/06/02/business/02regulate.html