U.S. Systemic Risk Watchdog Not Panacea: Regulators

[elleng]

Source: NYT/Reuters

Two top U.S. bank regulators offered competing views on the value of creating a so-called systemic risk regulator to oversee broad threats to the financial system, with one saying the move would be only of "incremental benefit."

Federal Reserve Governor Daniel Tarullo said a systemic risk regulator should help cut the risk of big financial shocks, but Federal Deposit Insurance Corp Chairman Sheila Bair said regulators already had ample powers that they should employ more aggressively.

In congressional testimony obtained by Reuters on Thursday, Bair urged U.S. lawmakers to move with caution in crafting new rules to regulate banks, insurance firms, broker-dealers and other financial firms.

"We need to recognize that simply creating a new systemic risk regulator is a not a panacea," Bair said in testimony prepared for delivery to the Senate Banking Committee. "The most important challenge is to find ways to impose greater market discipline on systemically important institutions."



Read more: http://nytimes.com/reuters/2009/03/19/news/news-us-financial-usa-regulation.html

[No Elephants]

1. I wish the media would stop with the misleading headlines. One party is

saying we need new regulation and the other party is saying we should enforce the regulations we already have. NO ONE in the story is saying regulation is not a panacea.

Impose greater market discipline systematically, without regulation? LOL. Even Greenspanfinally gave up on that dream.

IMO, we need to: enforce some regulations we do now have, reinstate some we abolished and enact new ones.

Regulate insurance companies so that they are not insuring gambling losses. Regulate investments so that you don't have Ponzi schemes and securities no one understands, like credit default swaps. And regulate everyone so that no one is "too big" to fail or will bring down the economy of the world without trillions in taxpayer bailouts.

After the stock market crash in 1929, we got securities laws, the Securities and Exchange Commission and a new bankrupty code, where an independent trustee would determine whether management should be held liable. All that has been dismantled or rendered toothless.

We need to reinstate some of those things plus enact laws based upon what this debacle has taught us. For me, that will be the true measure of the Obamadmin and Congress in this mess--not only what they do to clean this up, but what they do to protect us from future AIG's, Madoffs and Stanfords.