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Reactions to Obama's Financial Overhaul Vary

The Ticker scanned the econosphere for reaction to President Obama's plan to overhaul the regulations governing the nation's financial system in the wake of last year's collapse. Here's a sampling:

-- "The administration's proposal is so vast and controversial that it will be extremely difficult to enact and will produce great uncertainty in the financial markets," said Edward Yingling, president of the American Bankers Association.

-- "While markets are imperfect, regulators are even more so. Not only are they human, they are also bureaucratic and subject to political influences, therefore regulations should be kept to a minimum," billionaire investor and liberal activist George Soros wrote.

The Ticker finds this statement in disagreement with something Soros said in December: "It is the job of regulators to prevent bubbles from forming." Click here to read The Ticker's piece on Soros's controversial statement.

-- "Of course, there are some positive aspects to the Obama plan," the conservative Heritage Foundation's blog, the Foundry, grudgingly admits. "He recommends eliminating remaining limits on interstate banking. And, certainly, there are real problems in the current system that need to be addressed."

"But," the Foundry continues, "the plan offered today puts far too much faith in regulators to guide markets to where they should be. That is consistent neither with economics nor, given the role of many federal policymakers in contributing to the current crisis, with recent history. A better plan -- one that empowers consumers, rather than regulators -- is needed."

-- "The six principles set forth in the administration proposal represent a strong recognition of the need to modernize insurance regulation," the Financial Services Roundtable, the trade group of the financial services industry, said in a statement.

However: "The Roundtable is opposed to the creation of the Consumer Financial Protection Agency because it will not adequately serve the best interests of consumers and their financial institutions. The Roundtable opposes separating the regulation of the entity from the regulation of the products, as each regulator will only have half of the information," the trade group wrote.

-- “The financial turmoil of the last year revealed deep and serious flaws in our regulatory system," Timothy Ryan, president of the Securities Industry and Financial Markets Association, said in a statement. "The financial services industry believes it is critical to our nation’s economy that we work with policymakers in Washington to enact comprehensive reform this year to improve the accountability, transparency, investor protection and oversight of financial markets."

Ryan continued: "With their proposals today, the administration has moved this critical debate from broad discussion to specific action – this is an important step forward. We have a once-in-a-generation opportunity to rebuild our regulatory structure so that our financial system is more stable, more resilient and better underpins a dynamic U.S. economy."

-- "The Obama administration is presenting a misguided, ill-informed remake of our financial regulatory system that will likely increase the frequency and severity of future financial crises," Mark Calabria of the conservative Cato Institute wrote. "While our financial system, particularly our mortgage finance system, is broken, the Obama plan ignores the real flaws in our current structure, instead focusing on convenient targets."

Calabria continues: "Shockingly, the Obama plan makes no mention of those institutions at the very heart of the mortgage market meltdown – Fannie Mae and Freddie Mac. These two entities were the single largest source of liquidity for the subprime market during its height. In all likelihood, their ultimate cost to the taxpayer will exceed that of TARP, once TARP repayments have begun. Any reform plan that leaves out Fannie and Freddie does not merit being taken seriously." Read the full commentary by clicking here.

-- "Real reform has to include structural reforms, like breaking up massive financial institutions that are still exercising disproportionate political power over policies that are supposed to constrain them," the Notion, the blog of the liberal magazine the Nation, wrote. Read the full commentary here.

-- Frank Ahrens
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By Frank Ahrens  |  June 18, 2009; 5:03 PM ET
Categories:  The Ticker  | Tags: Financial Services Roundtable, George Soros, Obama, Securities Industry and Financial Markets Association, regulation  
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I still don't understand why this is necessary. As a Realtor, I have sat with clients at their closings when interest rates, penalties, late fees, remedies etc were explained by escrow officers. When truth in lending clauses were read to buyers. I have urged buyers to ask questions about anything they might not can try to get people to understand and to question but you can't FORCE them to do so!!

Those who purchase after new rules may be put in place will probably be no more interested in written or oral explanations than they ever were. It just plain isn't human nature. People closing on a home or a car are just plain too excited to be interested............sorry but that's the real world. The new owner just wants the keys and possession he does not care about the legal financing information, whether it's "fine" print or not.

Posted by: OregonStorm | June 21, 2009 12:19 AM | Report abuse

Soros's last book clarifies some of his most current quotes; and found it interesting reading.

What I find appalling are the comments by those that still believe that the "Greenspan" economic theory that the marketplace will act in it's own best interest. Sounds great and gives people the warm fuzzes; but it's, to be kind, nothing but "hogwash". Not all the economists, physicists, and mathematicians, with their merged equations for hedging bets and the application of all the computing power in the world, will not change the fact that economics is not a science. It will never be a science, as without humans it would not exist. We are flawed, so economic theory, the marketplace, and the idea of a self-controlling system (like gravity) are flawed; and believing otherwise is one of mankind's grandest self-delusions.

None of us can escape the basic instincts we will always have from our evolutionary past; and there are many many historic examples self-evident throughout the human time line. Angkor Wat being a good example, of how mankind's instinct is to push the bubble to bursting. Also, in the same area of SE Asia, there is the 48 yr. bamboo forest flowering/die-off cycle, with it's directing related black rat boom/bust example of pure instinctual behavior. To think these behaviors, like the SE Asia black rat and the people of Angkor Wat clearing 3,000 sq. kilometers of jungle, are not connected is to deny who we really are and where we came from. That denial has and will always have serious consequences; but no longer are these impacts localized.

The Foundry quote of "the plan offered today puts far too much faith in regulators to guide markets to where they should be. That is consistent neither with economics nor, given the role of many federal policymakers in contributing to the current crisis, with recent history. A better plan -- one that empowers consumers, rather than regulators -- is needed.", is one of those warm and fuzzes. Saying consumers should make the choices, and economists, bankers, and Wall St. will surely listen. Who do they think they are kidding, it's a lie on its face. Again, we hear trust the system, trust us we know what we are doing, we have learned our lesson, etc., etc. For a while, I had some hope that some reality could prevail; but that was my own short lived delusion. Next bubble please.

Posted by: Lightningrod | June 22, 2009 12:06 PM | Report abuse

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