The Administration’s much ballyhooed ‘financial overhaul plan’ is remarkably timid. And internally self-contradictory.
As noted, for all the posturing, Geithner ran from SEC reform, executive compensation and insurance regulation. Sure, the ‘systemic risk’ approach touches large ‘too big to fail’ entities and requires registration by venture capital firms, private equity and hedge funds — although none of the latter are involved in our crisis. The hedge fund inclusion is a memory spasm from Long Term Capital. VCs and LBO firms are just camouflage to cover the inclusion of hedge funds.
A new regulatory regime is a political necessity, of course, if nothing more. Truth be told, many of the existing regulations and regulators and congressional oversight mandarins failed or were bought off. A new system will rise or fall on the same human failings.
What makes the Stiftung wonder if Geithner isn’t just throwing a deliberate air ball is credit default instruments almost routinely include a change of control clause as boilerplate. The credit default swap market is about $86 trillion. Is Geithner suggesting that federal seizure is a viability with cascading automatic defaults? We’ve yet to study the whole document in depth but so far call us underwhelmed.
Starting out with luke warm oat meal before negotiations is a sign of things to come. No wonder Wall Street is happy.
Oh, Newt, Newt.
GINGRICH: We are seeing the biggest power grab by politicians in American history. The idea that they would propose that the treasury could intervene and take over non-bank, non-financial system assets gives them the potential to basically create the equivalent of a dictatorship. […] Look, it absolutely moves it towards a political dictatorship.