Top Obama administration officials are close to proposing that Congress create a single regulator to oversee and detect activities that could pose risks to the banking sector and the entire financial system, The Wall Street Journal reported late Wednesday, citing people familiar with the matter.
From WSJ: The new agency is expected to be a major plank in a proposal that Treasury Secretary Timothy Geithner and White House officials send Capitol Hill in a few weeks with the goal of overhauling supervision of financial markets.
Other components under consideration are an agency to police financial products offered to consumers and a beefed-up investor protection regulator.
People involved in the process said much is still in flux and could change before a formal recommendation is made to Congress in mid-June.
The new bank regulatory agency could prove controversial because it would consolidate the Office of the Comptroller of the Currency and the Office of Thrift Supervision and strip supervisory powers from the Federal Reserve and the Federal Deposit Insurance Corp.
The Fed and the FDIC would gain other powers, though, as White House officials want the Fed to be able to oversee systemic risks in the economy. They also want the FDIC to have new powers to take large financial companies that aren’t banks into receivership.
Further centralizing the entire monetary system in the hands of a single federal agency, doesn’t really seem the wisest choice of action. I think Prof. Friedrich Hayek’s (1974 Nobel Laureate) argument in his 1976 paper, ‘Denationalisation of Money’, is as relevant as ever.
Professor Hayek warned that governments and their appointed central bankers would be tempted to misuse their money monopoly to print excessive quantities of money, cause instability, indulge in undisciplined state expenditure and impose economic nationalism. One can easily see the truism in Hayek’s predictions.
Whether we like admitting it or not the reality is, we have broken and continue to break every single rule of prudent monetary and fiscal management.