Only the Congress of the United States is capable of this sort of monumental stupidity. It appears as if the responsibility for running a newly formed council of bank regulators is going to be delegated to the Treasury Secretary.
Let me rephrase that. The job of overseeing our financial system is going to be given to an individual whose primary job is implementing the political agenda of his boss — the President of the US.
Regulation of the banks and whatever else gets thrown into the mix is now going to be driven by politicians who have little or no interest in a safe and sound banking system. As we know too well, their primary interest is the perpetuation and enhancement of their own power with no regard for the consequences.
Should this come to pass then we can expect regulation to morph into nothing more than the reflection of the particular bias of succeeding administrations. It will ensure a steady stream of cash from Wall Street as they seek to further bend rules to their advantage while any notion of a consistent regulatory philosophy flies out the door.
In many respects, this amounts to if not the emasculation of the Fed than certainly its marginalization. While Bernanke may have received a pass for his role in the bubble and subsequent rescue efforts, this turn of events may well provide a very sad obituary for his terms indeed.
I need to say nothing more than to offer this quote from James Bullard, the president of the St. Louis Fed which is contained in the NYT article on this turn of events:
But some in the Fed remain skeptical. James Bullard, president of the St. Louis Fed, said in an interview that Mr. Bernanke had been “too kind” in accepting blame for regulatory failings, given the failings of other regulators, from the Federal Deposit Insurance Corporation to the Office of the Comptroller of the Currency.
“If he’s giving up, it’s because he’s somehow making some calculations about what the realities are,” Mr. Bullard said.
“But I’m telling you, this business of how we’re going to give this to a committee and we’re going to have an effective response to the next crisis. That is a joke.”