As one wag put it, the Obama Administration’s new regulatory scheme to avoid future threats of financial system meltdowns which will be overseen by the Fed is like giving your teenaged son a new Corvette to drive right after he wrecked the family station wagon. Yes, the same Fed who presided over the early 2000’s era of easy NINJA (no income; no job; no assets) loan money and super-low interest rates, which helped bring about the near destruction of the US and indeed the World’s financial system last Fall, will now protect us against – what else? – future destruction of the US and World financial system.
What’s wrong with this picture? Well, there will be some kind of Consumer Protection oversight agency and/or Czar. Also, the sham of letting the woefully understaffed, underfunded, and grossly out-gunned Office of Thrift Supervision pretend to oversee global giants like AIG while they merrily traded absurdly risky incredibly overly-leverage, exotic financial instruments (yes, the ones that nobody understands but that sold like hotcakes in the mad frenzy of just a few years ago) will be no more. But, is this the kind of regulation that we need to stop the nonsense of the last 18 months from ever happening again?
Let me be the first to say that God only knows.
What is apparent though is that the financial industry lobbyists are alive and well, sucking heartily on the blood of the still new Obama Administration like so many malarial mosquitoes back in the 19th Century swamps surrounding New Orleans. The BailOuts of last Fall that were unaccounted for and granted without any strings or supervision were a product of such lobbying as it now turns out. So is this new package of highly touted, but questionable regulatory protections introduced with the usual fanfare this week.
The Good Old Boys (and Girls!) Club of financial heavyweights who now get their funding direct from the Fed at virtually zero percent interest so they can lend it to you via your credit cards at 17/25/35% interest rates, and then have the chutzpah to groan about how tough their business has become, did their best recently to nearly neuter credit card regulatory legislation designed to protect American consumers. Well, to protect them some day . . . after many more months to first finish their greedy gobbling from the most vulnerable of American consumers – those who actually like the idea of financing their Friday night dinner with easy payments over the next three years or who actually believe they will live long enough to pay off their high card balances by paying the minimum due each month.
Of course, in our Media-saturated world, appearance counts so much more than substance, especially when you are talking about arcane and hard to understand financial and legal issues, which fly right over the tops of most people’s heads, like so many geese flying in whatever direction they fly in the Autumn. In a world where we don’t have to balance checkbooks because we can get our online balance 24/7, or to remember phone numbers because our ubiquitous smartphones take care of that for us, andwhere we all critically depend now on computing machines that few understand or could fix in a pinch, it is easy to project the caring and compassion necessary for those 6PM soundbites and video clips to convince Mr. and Mrs. John Q. Public that things will be different this time.
But, will things really be different? Have we really learned anything from the frightening experience of being told last Fall that America’s economy was heading straight into a brick wall unless, instantly, nearly a Trillion dollars (actually, in the final tally, several Trillion dollars to be exact) was basically gifted to the same financial heavyweights whose armies of lobbyists have just engineered another coup of getting regulatory changes made which may well change nothing – but, they do look good for our brief, 21st Century Media-minute attention spans.
I’m obviously dubious. As far as I can see, the banks are not out of the woods yet, the bankruptcies of two of our country’s Big Three automakers are still big fat question marks, and the proverbial ‘other shoe’ is about to fall in the tightly knit and oh-so-fragile worlds of both commercial real estate and retail, each of whom heavily depends on credit which still simply isn’t there. This new regulatory scheme to take the systemic risk out of the financial world has so far been underwhelmed me; but, I will try to keep an open mind.