What Will New Financial Regulation Look Like?
Rep. Mel Watt (D-N.C.) just asked the witnesses before the House Financial Services committee one of those classic Hill hearing questions that essentially boils down to this: "I want you to give me a simple one-sentence answer to his mammoth, sprawling and incredibly complex question."
Of course, that's impossible, but the process does serve to clarify matters and get often long-winded academic witnesses to focus their thinking.
Watt asked: How would each of you structure the new regulation and regulators to prevent another financial crisis?
Alice Rivlin, former director of the Congressional Budget Office, said "the number of regulators should be less than it is now," citing duplication and waste. She said the government needs a "regulator of behemoths" that are now known as bank-holding companies, such as Goldman Sachs.
Nobel prize winner and author Joseph Stiglitz (it's no wonder his books run hundreds of pages), started veering off into topics such as "regulator capture" and resisted Watt's attempts to steer him back to the question. Finally, he said duplication of regulation is just fine, thanks. And kept talking after Watt tried to cut him off.
Joel Seligman, president of the University of Rochester, urged a "comprehensive" system that fills the "terrible, gaping holes in it right now, like credit-default swaps," which are unregulated. He also favors "some form of crisis manager at the top," which could be the Fed.
Manual Johnson, former vice chairman of the Fed Reserve Board, said the regulators that are in place now can do the job, if there is more transparency and cooperation among agencies and "expertise and supervision" which, he said, has been weak at the SEC.
Ford Watch: The news of Kirk Kerkorian's big sell-off of his Ford stock this morning continues to hammer shares of the automaker, which is now trading down more than 6 percent and may, by the end of the day, be a dollar stock.
-- Frank Ahrens
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