Fed Chair Says U.S. Economy Needs New Regulatory System

[flashl]

Source: Washington Post

The government should create a new system to ensure that major financial firms can fail without creating risks for the larger economy, Federal Reserve Chairman Ben S. Bernanke said today, in a sweeping speech that outlined his views on how regulation of the financial system should be overhauled.

"Congress may wish to consider whether new tools are needed for ensuring an orderly liquidation of a systemically important securities firm that is on the verge of bankruptcy, together with a more formal process for deciding when to use those tools," Bernanke said in a speech in Arlington to the Federal Deposit Insurance Corp.'s forum on mortgage lending for low-income households. A model may be the FDIC's current system for disposing of the assets of failed commercial banks, he said.

In the absence of such a formal system, the Fed made the decision to rescue failed investment bank Bear Stearns in March in the middle of the night, in an improvised fashion, and using emergency authority. Bernanke acknowledged that his decision to extend loans to investment banks, using that emergency authority, created new risks.

"The Fed's decision to lend to {investment firms}, although it was necessary to avoid serious financial disruptions, could tend to make market discipline less effective in the future," he said.

Washington Post

edit: removed advertisement icon

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2008/07/08/AR2008070800905.html?hpid=topnews

[Javaman]

1. this is nothing like closing the door after the horse has gone...

this is more like trying to find the door after the tornado blew through.

[DailyGrind51]

2. So much for laissez faire (license to steal) economics!

[sui generis]

3. The problem isn't disposition of assets

Quite often as in the RTC, the issue was the disposition of OVERVALUED assets. Oh wait, so we're not bailing out inflated real estate this time? Just inflated mortgages?

Bernanke go home you dumbass. I have a toenail clipping that's smarter than you are.

[flashl]

4. Are you closely following this? "The GOVERNMENT should create a new system." Now read this:

Fed, SEC Team Up On Bank Oversight

Deal Formalized to Coordinate on Wall St.

Two top regulators reached a formal agreement to coordinate their oversight of Wall Street yesterday, as the government attempts to build a new system to guard against a meltdown of the financial system.

Leaders of the Federal Reserve and the Securities and Exchange Commission signed a memorandum of understanding that explicitly allows for the two agencies to share information about the inner workings of investment banks. The move formalizes what has been a reality since the rescue of Bear Stearns in March and marks an end to an era in which the two agencies held information close to their vests.

Washington Post

Did I somehow missed the "Congress may wish to consider whether new tools are needed" part? :shrug:

[On the Road]

7. Apparently So

Bernanke called for Congress to give the agencies that regulate Wall Street firms more explicit authority. Currently, large investment firms agree voluntarily to broad oversight by the Securities and Exchange Commission.

If an agency is calling for a change, one would expect them to propose what that change would look like.

[flashl]

9. As I read it, the Feds made a "call to 'Government/Congress' for change" then

announces the Fed/SEC "change" in the form of a MOA.

[On the Road]

23. Agencies Often Have Generally Defined Powers

and I would assume there is a lot that the Fed and the SEC can do on their own. But part of their plan may require changes in the law. That was how I read it.

[flashl]

24. Understood. This seems similar to the Fed Reserve exercising emergency powers

when bypassing establish procedures or regulations to conduct auctions.

In Dec 2007, the Fed bypassed procedures to gain auction authority, the procedures required prior notice and public comment to conduct the auctions.

The FR request to Congress and then the announcement of the MOA seems to be more of the same.

[Skink]

5. The plunge protection team needs plunge protection.

[fascisthunter]

6. No.. we Just Need A Regulatory System Period

[Zorra]

18. Exactly. Corporations need strict government regulation and oversight

What Benny Boy is proposing is putting the cart before the horse.
:thumbsup:

[Phred42]

8. Easy! Simply limit the size and one company can be.

Break the bastards up - Anti-Trust?

Go back the the original Corporate charters that stated that a Corporations CANNOT OWN another Corporation

[Trillo]

10. Would "failed investment banks" also mean

the Federal Reserve System?

Bernakespeak? We don't particularly care about helping homeless poor folks or common citizens, but when one of our important entities gets in trouble, corporate-welfare efforts to save them will be effected immediately.

[MadrasT]

11. DOH!

Gosh... what gave them that big clue???

ARGH!!!!!!!!! :banghead: :banghead: :banghead:

[pattmarty]

12. NO FUCKING SHIT!!!!!!!!!!!!!!!!!

[northernlights]

13. reads more like redistribution of wealth to me...

...he just wants an orderly robbery the average low-life citizens to bail out the corporate behemoths and their VIP leaders.

Why not just go back to the good ol' days of regulations against outright fraud, antitrust, etc.

Oh wait a sec. Silly me. That's what created that pesky middle class that has taken babyBush a full 7 1/2 years to dismantle. :shrug:

[Sam Ervin jret]

14. So is the choice between no one guarding the hen house or the fox guarding the hen house?

Just like the rethugs to try to falsely limit the options in any choice to their shitty ideas.

Idiots and a$$holes!

[slipslidingaway]

15. Kick for later and an R for more exposure/discussion n/t

[paparush]

16. This is akin to saying the Titanic became "increasingly moist" after striking the iceberg.

[paparush]

17. Howzabout we change the fact that coropations have more personal rights than

actual,living, persons.

[Quantess]

20. Agreed.

Corporations and vampires have eternal lives.

Potentially eternal, that is. They slowly die if they can't feed off someone else's blood.

[Turbineguy]

19. To be popularly known as:

The Rolls-Royce and Bentley Dealers Reconciliation Act of 2008

[bemildred]

21. How about less fake "assets" and less fake money?

The economy needs to be something better than a Ponzi scheme.

[veracity]

22. Reminder: Just who really owns the Fed?

More power? Amazing. The fed is not a government institution... it is a private bank. So few people really understand, and they want even more power. Important read:

http://tvnewslies.org/tvnl/index.php/editorial/jesse-richards-commentary/19-jesses-thoughts/665-dear-lou-dobbs-who-owns-the-federal-reserve