Showing posts with label US Department of the Treasury. Show all posts
Showing posts with label US Department of the Treasury. Show all posts

Wednesday, April 22, 2009

Relationship Map: Goldman Sachs and Treasury


Tuesday, April 1, 2008

Treasury Announces Intention to Implement Portions of Overhaul Via Executive Order

On a conference call with Assistant Secretary for Financial Institutions David Nason yesterday, Treasury Department officials announced that they will implement many parts of their plan to overhaul the nation's financial regulatory structure by executive order. This includes "streamlining the approval process for securities that contributed to the crisis now roiling Wall Street."

According to the Washington Post, "The Treasury's initiatives seek to sweep away the current patchwork of regulation over the coming decade in favor of three more powerful agencies to oversee banking, market stability, and consumer and investor protection."

Treasury officials also acknowledged that the plan is "silent on CRA," or the Community Reinvestment Act.

As Paul Krugman noted,

"Traditional, deposit-taking banks have been regulated since the 1930s, because the experience of the Great Depression showed how bank failures can threaten the whole economy. Supposedly, however, 'non-depository' institutions like Bear (Stearns) didn’t have to be regulated, because 'market discipline' would ensure that they were run responsibly.

When push came to shove, however, the Federal Reserve didn’t dare let market discipline run its course. Instead, it rushed to Bear’s rescue, risking billions of taxpayer dollars, because it feared that the collapse of a major financial institution would endanger the financial system as a whole.

And if financial players like Bear are going to receive the kind of rescue previously limited to deposit-taking banks, the implication seems obvious: they should be regulated like banks, too."

We agree that "if financial players like Bear are going to receive the kind of rescue previously limited to deposit-taking banks,they should be regulated like banks."

This includes CRA.

Saturday, March 29, 2008

"Treasury Dept. Plan Would Give Fed Wide New Power"

According to the New York Times, a Treasury Department plan released (over a weekend to the press and selected insiders only) would give substantial new power to the Federal Reserve Board. "The Treasury plan would let Fed officials examine the practices and even the internal bookkeeping of brokerage firms, hedge funds, commodity-trading exchanges and any other institution that might pose a risk to the overall financial system." This would be a significant expansion of the central bank’s regulatory mission.

We are not, at this point, opposed to this effort. We noted, in an October 2, 1998 filing with the DC Circuit of the US Court of Appeals (Case Number 98-1459), our belief that the Fed should be designated a "Super-regulator, with broad responsibility for overseeing the activities of banks, thrifts, pension funds, insurance companies, mutual funds, brokerage firms and investment banks.

We believe social investors need to review the plan carefully. The Times stated:

"The proposal is part of a sweeping blueprint to overhaul the nation’s hodgepodge of financial regulatory agencies, which many experts say failed to recognize rampant excesses in mortgage lending until after they set off what is now the worst financial calamity in decades." (This is, of course, false. Financial regulatory agencies recognized "rampant excesses in mortgage lending" (see: Irrational Exuberance) but were unable to take the steps required to protect the financial system.)

Treasury's plan calls for the consolidation of "banking and securities regulators into a powerful trio of overseers responsible for everything from banks and brokerage firms to hedge funds and private equity firms."

Further, "the plan does not recommend tighter rules over the vast and largely unregulated markets for risk sharing and hedging, like credit default swaps, which are supposed to insure lenders against loss but became a speculative instrument themselves" and it "reduce the power of the Securities and Exchange Commission" while merging the S.E.C. with the Commodity Futures Trading Commission.