101 Pages of Barackracy: Obama’s Regulatory Reforms
It’s been over a week since President Obama presented his plans to reform the regulatory structure of our financial markets. As someone who writes about such things, I knew many of my readers would expect me to watch the speech and write an analysis of what the new plan means to our collective future. And I tried. I really did. I turned on the television, sat back with my pad and pen and gave it my all. But it was hard. I couldn’t really focus.
He starts talking and I try to track what he’s saying, but then I start getting mad, and then I’m thinking: “What are you talking about… you are so full of… I can’t believe… are you kidding me…oh like hell.” And then I’m standing up yelling at the T.V. and throwing things. I stabbed my leg with my pen and bit my tongue… and before you know it, I had to lie down.
So, then I decided that maybe I better try reading the plan, but it’s like 101 pages long, so I knew it wasn’t going to be any fun either. It’s not that I can’t read long things… I read long things all the time. Hell, I’ve read bills, FASB regulations, even “The Rise and Fall of the Third Reich,” including the footnotes.
One of the things Obama said he was doing away with is one of the four federal banking regulatory agencies, the Office of Thrift Supervision. But then a little later in the plan it said that The Office of Thrift Supervision was being absorbed into one of the remaining three regulatory agencies, so that’s not really doing away with, now is it?
Still, I thought about writing the following:
President Obama’s plan would eliminate The Office of Thrift Supervision, sort of. Actually, his plan would fold the Office of Thrift Supervision into one of the remaining three federal regulatory agencies that oversee the banking industry. And I’m sure that will go… as they say in Silicon Valley… seamlessly.
I, for one, am relieved, because I have often suspected that the problems we face today could have all been prevented if we’d only had FEWER banking regulators…?
But that just didn’t seem right.
Obama also talked about a new federal agency that would be established to “protect consumers”. Apparently, it would oversee such consumer products as credit cards, mortgages, and annuities.
And I thought to myself… “Well, that’s good. A new federal agency. One of those never let us down before. I feel safer already.”
And that didn’t seem like the kind of thing that would be terribly helpful to my readers either.
So, then I made some soup. Sometimes a little soup is all you need to start reading. And I did, and it was unpleasant. The reading… not the soup. The soup was delicious. Green Pea with Ham, in case your interested. So, to spare you the experience… of the reading, not the soup… here’s a summary of what 101 pages of Barackracy had to say:
Obama said his plan would “protect consumers, impose new restraints on financial behemoths and guard against the murky practices that caused the market crisis”. Oh, so that’s what caused this economic nightmare, “murky practices”. See, what have I been saying the whole time? Murky practices, exactly. Maybe you’ll listen to me next time.
He went on to say:
“A culture of irresponsibility took root from Wall St. to Washington to Main Street. A regulatory regime basically crafted in the wake of a 20th Century economic crisis, the Great Depression, was overwhelmed by the speed, scope and sophistication of a 21st Century global economy.
And I spit out my soup.
Okay, look… no, wait… see the thing is… hold on… what I’m trying to say is… damn… will someone please… okay, wait. This shows that… come on… you see, I don’t think that… wait, no. Damn.
What does Obama think happened here? I mean, “speed, scope and sophistication” is lovely alliteration and all, and for that I give him credit. But that description made it sound like what caused our catastrophic economic meltdown was caused by the plot of a Star Wars movie: A regulatory regime from the 20th Century was overwhelmed by the speed, scope and sophistication of a 21st Century global economy. I feel like I should root for the 20th century regulatory regime and against the evil 21st century economy.
Memo to President Obama:
Excuse me Mr. President, but that might just be the biggest line of euphemistic crap it has ever been my displeasure to hear… or read. That’s not what happened here. It’s certainly not what caused this crisis. What caused this crisis was that the banks defrauded the world, and the government remained fast asleep, thus allowing them to steal as much as they wanted… and after they’d stolen billions, they blamed it on the borrowers. Why turn it into something in which Luke Skywalker might star.
Mr. President… with all due respect… who broke the bond market, sir? Who built the mortgage backed securities that earned the pet name “toxic”. Who sold those toxic bonds to investors all over the world? Who? Not the subprime borrowers, Mr. President. Not the government regulators either. It’s the banks, betch.
Obama also said that he wants to increase the amounts that financial institutions keep on hand to protect them against losses. Okay, don’t make fun of this one. This one is really important, especially when you consider that since he’s not going to actually fix anything about how the banks operate, we’re certainly going to have lots of future losses that will need protecting.
Now onto the credit ratings agencies. You know… Standard & Poors, Moody’s and Fitch. You probably remember them from their slogan: “The Triple A People”. I was waiting for Obama to really go after these guys, weren’t you? I mean these guys may not have robbed the bank, but they for sure drove the getaway car, right?
Well, Obama’s plan urged the ratings agencies in very strong terms to “bolster the integrity of their ratings”. Oh my, I’m sorry… I should have warned readers before using tough language like that.
But, that’s not all. The plan establishes new conflict of interest rules for credit rating agencies. Now, conflicts of interests are mandatory, before they were optional. (Kidding… just kidding… I kid… I’m a kidder.)
In case you’re wondering about the teeny tiny little problem that may have arose from the ratings agencies being paid by the issuers whose bond issues they rate… well… that part seems to be fine. We’re apparently good there. Why fix it, if it ain’t broke, right? Besides… obviously the ratings agencies are too big to fail, so… you know the drill.
Obama also wants to require the banks to keep 5% of the mortgages they originate on their books. The thinking is that doing so will discourage banks from marketing “abusive or ill suited loans.” Personally, I would have preferred that he do a little more than just “discourage” the banks from breaking the world again. But it might not matter, because the banks could always come up with a cost structure that makes losses on the 5% irrelevant, which by my calculations should slow them down for at least the better part of one entire morning.
He also said that he wants the Federal Reserve to supervise just about everything having to do with money, and I say why the heck not? They’ve done a bang-up job to-date, so why not put them in charge of every nickel? Right on. In his testimony to congress, Secretary Geithner pointed out that the Fed didn’t supervise Bear Stearns, Lehman Bros, or Countrywide.
Of course, on the other hand, they did supervise Citigroup, IndyMac, Washington Mutual, Wachovia, Bank of America, and Wells Fargo, so that makes for quite the resume right there.
Obama’s plan would also grant new powers to the FDIC so they would be able to seize troubled banks when they screw up and lose all the money they’re not supposed to lose. I had thought they could already do that, but maybe they’d be able to do it better or something under Obama’s plan. Well, good. We’re going to need to seize quite a few banks going forward, so very soon this provision is going to prove itself to be handier than a pocket on a man’s shirt.
The plan would also give the SEC and the Commodities Futures Trading Commission the authority to put rules in place governing derivatives, like credit default swaps. So, yea! The authority to make “rules”! That’s probably a good thing, don’t you think. Now the average American will be able to buy credit default swaps and other complex derivatives with the knowledge that they’re “regulated”.
Obama said that rather than a complete overhaul of the system, which Lord knows we certainly did not need, he decided to “pinpoint the structural weaknesses that allowed for this crisis.” If anyone would like a moment to go back and check out all those “pinpoints,” the rest of us could probably use the break. No? Okay then…
He said that his goal was “to create a system that works effectively for both businesses and consumers… one that would enhance honest and vigorous competition, rather than reward gimmickry.”
And thank God we’re finally going to stop rewarding gimmickry in this country. It’s about time, and I think we can all agree on that. Because those are exactly the words I used when the market went from 14,000 to 7,000. God, stop the gimmickry already!
Then, he followed that up by saying that he has never lost his faith in the free market, which led me to wonder what it takes for him to lose a little faith. Because if this didn’t move the free market faith needle even a little bit, that man’s a rock as far as keeping the faith goes.
Look, that’s all I can do on this, but believe it or not, I essentially covered everything in his 101-page plan. Of course, the today’s newspapers are packed with stories about the reactions to the Obama plan. Senators have some trouble with some of the proposal. It seems they find it objectionable that the Fed is controlling everything. And the banks hate whatever it is that makes them do anything, or stops them from doing something.
The thing is… I learned a lot from reading Obama’s plan. Mostly I learned that either he hasn’t a clue what started this crisis, or what allowed it to spread, or he thinks that none of us know. He’d better get a handle on all things economic soon because if he doesn’t, he’s going to have a dickens of a time fixing things.
Overall, I wouldn’t say that our new Barackracy is something to get too excited over. Go ahead and do whatever it is you were doing.
Maybe I’ll revisit the whole issue once they’ve picked out some shiny new acronyms for the new departments… like the new consumer protection agency could be called: “The Bureau of the Lame and Outdated-Worthless Methods Edition, or BLOWME for short.
Just a thought. Thinking out loud over here. Don’t hate me. Don’t be a hater. Geeze… tough crowd.
Hope and change people, hope and change!