CHANGE OF PLANS

Chris the Crook released his 1100 page bill regarding financial regulation to public scrutiny yesterday. It is pure and simple a political power grab of the first order and at first blush worse than anything that could be imagined. It completely destroys the independence of the Federal Reserve, wipes out the Reserve System as we know it, transfers all oversight to a yet to be determined council or regulators, appears to eliminate all emergency lending powers of the central bank in domestic markets and appears to demand oversight authority on international operations of the central bank such as bank to bank swaps (central banks) and currency procedures. It also sets up a consumer protection agency which will almost certainly result in less consumer credit and foster unsound practices as the the community lending legislation of years past. In short, it may be the stupidest piece of financial regulation ever proposed.

As previously stated, this is a populist rant, put forward by a Senator desperate to retain his seat in the 2010 election in the face of voter anger over clearly conflict of interests which have been revealed over the past 18 months. Dovetailed with the health legislation moving slowly through the congress it is a thinly veiled attempt to control yet another huge portion of the national economy in some sort of big government orgy which those on the political left feel is needed if not wanted by the public. We might as well call it what it is...socialism...and there is absolutely nothing wrong with the concept of socialism. Throughout my career I had a great deal of contact with societies operating under various levels of socialism which had been voted for or imposed. Some worked, many didn't. None had the dynamism, the productive capacity, the flexibility, the drive or the sheer excitement of that which we have created here. But if that's what we want, they are sure prepared to give it to us.

Anyway, what Dodd seems not to understand is that the socialization of the financial sector will probably result in greater, not lesser risk to the American public. This great, unseen terror of systemic risk, lurking behind every corner is not limited to an American zip code but is a compendium of possible risks arising from the globalization of risk at many levels and in many locations. Further, whilst it may well be true that the origin of the last crisis began in the fertile minds of American financiers,
it's development and maturity of the crisis came about as a result of world-wide financing and investment decisions. To think that at a point we will not face another yet-to-be-identified crisis is to be a fool: to think that a hodge-poge of governmental appointed and directed bureaucrats, operating within a highly charged political environment will have the flexibility and authority to deal with it when it comes is to be a monstrous fool. To believe that politicians around the world in democratic societies are to be this stupid is to be...well, Chris Dodd. And yet, unless all of the now-annointed G-20 sign on to this sort of arrangement it will have no chance of acceptance on a global level. Be assured, they will not.