ABOVE THE FOLD

The positioning of a news story is usually a good indicator as to its importance. With respect to the New York Time"Above The Fold" always indicated that the story was important(the paper being folded in the middle for newsstand presentation). less known is what the positioning as to the right or left above the fold means with everybody knowing that right column, above the fold is reserved for THE story of the day...but the left? Ah, that's an important story but over the years regular readers have figured out that the Times didn't have to work quite as hard for that one. That position is usual a spot for an important leak; a tale the pols want run up the flag pole to see who salutes. So it was today.

The Times released a story indicating that the administration had reached the decision that it would be the Treasury that would be the overseer of systemic risk...or something like that. What was suggested that the Secretary of the Treasury would chair the effort with the Chairman of the Federal Reserve serving as vice-chair. What that means of course is anybody's guess but that's about as far as the discussion got. Interesting enough, what was NOT said was that there was broad, general agreement to this policy decision either within the administration or within Congress...or at least that's the way I read it.

Now we all know that Helicopter Ben had pretty much caved on everything to insure his re-confirmation but what is less widely know is that there has been a hell of a push-back not only in the D.C. Fed but in the reserve banks as well. And rightfully so I might add. On top of this it is the systemic risk issue that has gotten everyone's knickers in a twist around the world (although no one has a better handle on what they are talking about than we do) but that is coupled with a concern that Uncle hasn't really gotten its act together especially on the political level. Nobody wants to deal with this Treasury which is generally considered to be disorganized and in some areas quite inept. On a issue such as this where a full and in depth understanding of all things international, not the least of which is the payments system, few consider the Treasury to be the peer of the Fed. But as is becoming more and more clear, everything in this administration is political and to a great extent everything is being run by the policy boys who in matters such as this are precisely the people you DON'T want running things.

I've said before that I haven't a clue what is a systemic risk institution except that it undoubtably one that is BIG in size and BIG in functions. It is one that is too big to fail but as Volker the Great has put it if you're too big to fail, you're too big. Consequently, at some point somebody is going to come to reach the startling conclusion that everybody is talking in circles and the answer is not in the appointment of some mess of poor schnooks who are given all the responsibility but none of the authority to prevent what is probably unpreventable by those not endowed with the foresight and wisdom of the Deity and to focus more clearly on governance of the institutions themselves for as much as we may hate to admit it I suspect we have reached to point--for a variety of reasons--where regulation and regulatory infrastructure have reached their limits. More on that in the days to come.