Hank Paulson and modalistic monarchianism
Hank has decided that regulation should come in three different modes: a `Prudential Financial Regulator' to oversee financial institutions that have an explicit government guarantee such as deposit insurance, a `Business Conduct Regulator' to monitor disclosures, business practices, chartering and licensing and a `Corporate Finance Regulator' with `responsibilities for general issues related to corporate oversight in public securities markets.' See here for Bloomberg's story, and here and here for the NYT.
There would be a single banking supervisor,- presumably a merged OCC/OTS,- and a single public markets supervisor, a merged SEC/CFTC. Presumably the SEC would lose its regulatory oversight of the broker/dealers to the Prudential Financial Regulator. In a potentially rather important move, a single national insurance regulator is also suggested.
Broadly this seems like a positive step. It would at least reduce the proliferation of agencies, boards and supervisors. Rolling the supervision of the FHLBs and the GSEs into the financial regulator would be a good idea, but given that the US system is a relic of the 30s, dragging it kicking and screaming into the 1980s is a good start. I still think the political battles will be prolonged, that they are likely to result in watering down of even these fairly modest proposals, and that this is not nearly enough. But this is definitely positive.
Update. The comment on these proposals has mostly been negative. See for instance here for Paul Krugman, here for Naked Capitalism or here for the NYT. Talk of light handed, Wall Street friendly regulation misses the point. Yes, the proposal is inadequately tough, but it does break the log jam of regulatory reform. If something is done it shows that doing something is possible. In particular the proposal may address the most glaring issue in the US regulatory system: the regulatory advantage of the SEC-regulated broker/dealers vs. global banks under Basel 2. Baby steps, dear reader, baby steps.
There would be a single banking supervisor,- presumably a merged OCC/OTS,- and a single public markets supervisor, a merged SEC/CFTC. Presumably the SEC would lose its regulatory oversight of the broker/dealers to the Prudential Financial Regulator. In a potentially rather important move, a single national insurance regulator is also suggested.
Broadly this seems like a positive step. It would at least reduce the proliferation of agencies, boards and supervisors. Rolling the supervision of the FHLBs and the GSEs into the financial regulator would be a good idea, but given that the US system is a relic of the 30s, dragging it kicking and screaming into the 1980s is a good start. I still think the political battles will be prolonged, that they are likely to result in watering down of even these fairly modest proposals, and that this is not nearly enough. But this is definitely positive.
Update. The comment on these proposals has mostly been negative. See for instance here for Paul Krugman, here for Naked Capitalism or here for the NYT. Talk of light handed, Wall Street friendly regulation misses the point. Yes, the proposal is inadequately tough, but it does break the log jam of regulatory reform. If something is done it shows that doing something is possible. In particular the proposal may address the most glaring issue in the US regulatory system: the regulatory advantage of the SEC-regulated broker/dealers vs. global banks under Basel 2. Baby steps, dear reader, baby steps.
Labels: Regulation
posted by David Murphy at 14:10
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