Historic Overhaul of Finance Rules

WASHINGTON -- President Barack Obama urged policy makers to rewrite the rules governing U.S. finance, unveiling far-reaching proposals that would affect nearly every aspect of banking and markets.

The White House hopes Congress can complete work on the plan by year's end. But it is sure to face opposition both from some on the right who say it threatens to throttle free markets and others on the left who say it doesn't go far enough. Some in Congress are cautioning against haste.

The proposals are the latest instance of the administration seeking to expand its reach in the private sector. White House officials said the trauma of the current crisis shows a more muscular federal arsenal is needed to protect the financial system.

"Millions of Americans who have worked hard and behaved responsibly have seen their life dreams eroded by the irresponsibility of others and by the failure of their government to provide adequate oversight," Mr. Obama said. "Our entire economy has been undermined by that failure."

The administration's vision would have consumers offered more "plain vanilla" financial products. A new agency would regulate financial products for consumers, such as mortgages.

There would be rules designed to mitigate booms and busts, a goal often sought but rarely reached. The U.S. would gain powers to take over tottering financial giants and supervise firms that could pose a threat to financial stability, even those that don't own banks.

Anyone care to take a stab in explaining the pros and cons to a 16 year old in an unbiased manner?

IMO here are some money quotes in the WSJ article:

....a more muscular federal arsenal is needed to protect the financial system....
....rules designed to mitigate booms and busts....
....powers to take over tottering financial giants and supervise firms that could pose a threat to financial stability....
....Executive compensation and hedge funds would face more scrutiny.... ....Financial firms would be required to hold more capital....

And this one line leaps out at me....

Bank regulation would be streamlined somewhat.

Which IMO leads to the key sentence in the entire article:

a push to centralize more power in the Federal Reserve.

As I read it, what Obama wants is for Congress to create laws for Obama to sign, allowing the Federal Reserve and the Attorney General to act against private sector investment firms. These laws would implement Federal regulations and & oversight re private investment vehicles, and would require investment firms to keep a portion of their assets stored within the Federal Reserve. Firms that fail to win government approval, or that are believed to be a threat to the nation's "financial stability" will face nationalization, and executive of those firms could face jail time, if they do not comply.

Thanks, Alex.

All I could think of was that with this plan we will bypass socialism and run straight into communism. The federal government would create the rules AND enforce the rules, then punish those for breaking them. They would give and take power to and from agencies, departments, individuals as they see fit. To me, this is one more way the federal government will exert more power and control over our lives all under the guise of protecting us without any legitimate checks and balances. It is my belief this administration is overdosing on the power of the office. They should read and understand the Constitution and remember the oath they took.

Thank you for taking the time to clearly state the ramifications in terms I think he’ll understand. I just get to passionate about stuff like this and end up ranting instead of educating.

The “pros” are the appearance of good intentions, the “con” is that the devil is in the details, and quite often that devil is place there by those who mouth the good itentions.

“A new agency would regulate financial products for consumers, such as mortgages.”

The devil in that part is as intended for it all along. It is a first in federal agencies, as the law creating it removed it from accountability to Congress. It sets its own budget, and takes, by law, what it wants for that budget from the Federal Reserve; needing to ask Congress for none of its financing.

Is sets its own agenda in that the law is so vague as to what it must “regulate” that it essentially sets its own course, decides for itself what “financial agreements” come under its regulations, who comes under its regulations, and decides for itself how deeply and how broadly it will inject itself into “financial agreements”. It is not so much a Federal agency as it is a “financial agreements” regulatory dictatorship wherein Congress has given up representative government, given up its authority, to an unelected dictator in the person appointed to run this unaccountable agency.

Congress did not write a law that specifies anything about “financial agreements”. It created a dicator agency to, by executive fiat, say whatever it wants on the subject. We are suppose to believe that such an act was “good” and whatever this agency dictates will be “good”.

The truth is, the devil in the details is that the law achieves its very real purpose - to remove Congress, to remove representative government from looking into, investigating, AND debating the pros and cons of various “financial agreements”, AND debating legislation about specific regulations, and settling each issue through represntative government drawn legislation. Replcaing the whole process with a single unaccountable agency that Congress gave up any control over.

“There would be rules designed to mitigate booms and busts, a goal often sought but rarely reached. The U.S. would gain powers to take over tottering financial giants and supervise firms that could pose a threat to financial stability, even those that don’t own banks.”

It is government interference in the organic functioning of markets that creates the biggest booms and busts.

The Federal Reserve was, when it was created, said to be the agency that would end the boom and bust cycle by its manipulation of credit and the money supply. That was in 1913, sixteen years BEFORE the stock market crash of 1929.

There have always been ups and downs in the business cycle and always been market bubbles and burst-bubbles. They have been worse and more systemic since the creation of the Federal Reserve BECAUSE ITS OWN ATTEMPTS TO CONTROL EVENTS HAVE MADE MATTERS WORSE.

Fannie Mae and Freddy Mac were too of the biggest finanical giants in the mortgage markets, and they were tottering before 2008 and among the first to totally fail in the 2008 financial crisis, beacause the cause of their failure was they created excess risk, for themselves, their investors, and those who traded financial instruments with them BECAUSE EVERYONE INSIDE AND OUTSIDE OF THOSE INSTITUTIONS KNEW THE U.S. GOVERNMENT, THE U.S. TAXPAYERS WOULD BAIL THEM OUT SHOULD THEY FAIL.

Saying that “The U.S. would gain powers to take over tottering financial giants and supervise firms that could pose a threat to financial stability, even those that don’t own banks.” in actuality means that many more financial institutions, knowing the taxpayers will be forced to bail them out when they are tottering, WILL take more risk KNOWING that the U.S. government, the U.S. taxpayer, will step in and keep the institution running. A U.S. government gaurantee to come to their rescue, is not an act that keeps them from creating excess financial risk for themselves and others, like Freddie and Fannie, it guarantees that they will - and we will pay for it.

The law does even define a “totering financial institution”, leaving it to regulators to chose who is worthy of being rescued, who is “too big to fail”, and who is not. And “too big to fail” is a concern itself, because with that priorty it is ONLY the largest financial institutions that will be “saved” by the authority of that law in a major crisis, and the number of financial institutions will continue to shrink; as hundreds of small and medium sized institutions will be considered “too small to protect” (that’s what NOT being “too big to fail” will mean in practical terms).

By pretending to “protect” financial institutions from themselves, it enables financial institutions to operate (take on excessive risk) KNOWING the taxpayers will be pulled in to pony up bailouts in a crisis.

A better law would be a Federal guarantee that the owners and investors in financial institutions will never again get a dime from the U.S. taxpayer; that their investors and depositers should remember that and run away from those who are taking on too excessive risk. Nothing would better “reform” their behavior than that.

Hello i am a 17 year old kid in my senior year of high school. I had this given to me to read also. I asked my mom to elaborate and this is what she came up with.

“All I could think of was that with this plan we will bypass socialism and run straight into communism. The federal government would create the rules AND enforce the rules, then punish those for breaking them. They would give and take power to and from agencies, departments, individuals as they see fit. To me, this is one more way the federal government will exert more power and control over our lives all under the guise of protecting us without any legitimate checks and balances. It is my belief this administration is overdosing on the power of the office. They should read and understand the Constitution and remember the oath they took.
IMO here are some money quotes in the WSJ article:
... a more muscular federal arsenal is needed to protect the financial system
.... rules designed to mitigate booms and busts
... powers to take over tottering financial giants and supervise firms that could pose a threat to financial stability
.. Executive compensation and hedge funds would face more scrutiny.
... Financial firms would be required to hold more capital

And this one line leaps out at me ....

Bank regulation would be streamlined somewhat.

Which IMO leads to the key sentence in the entire article:

a push to centralize more power in the Federal Reserve.

As I read it, what Obama wants is for Congress to create laws for Obama to sign, allowing the Federal Reserve and the Attorney General to act against private sector investment firms. These laws would implement Federal regulations and & oversight re private investment vehicles, and would require investment firms to keep a portion of their assets stored within the Federal Reserve. Firms that fail to win government approval, or that are believed to be a threat to the nation's “financial stability” will face nationalization, and executive of those firms could face jail time, if they do not comply.”

hope this helps :)

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