Feds Propose Increased Financial Regulation

On Monday, Treasury Secretary Henry Paulson disclosed a plan to massively increase the powers of the Federal Reserve to regulate private financial institutions. The unveiling comes 11 days after House Financial Services Committee Chairman Barney Frank proposed a “Financial Services Risk Regulator” which would be managed by the Federal Reserve and would have the “capacity and power to assess risk across financial markets regardless of corporate form and to intervene when appropriate.” (Frank Calls for Increased Regulation, Wall Street Journal)
Paulson’s plan would “allow insurance companies to opt out of state regulation in favor of a newly created federal insurance regulator” (Treasury Proposes Financial Overhaul, McClatchy Newspapers), further outsourcing our capacity to self-govern to the federal government.
“The proposals would broadly expand the powers of the Federal Reserve, merge the regulation of stock and commodities markets, fold savings and loan institutions under the umbrella of bank regulation and allow insurance companies to opt out of state regulation in favor of a newly created federal insurance regulator.
For consumers, Mr. Paulson’s plan would create a new super-regulator whose powers would cut across financial services with overarching responsibility for protecting investors and consumers.
The plan also would create a new federal entity to oversee the mortgage origination process.”
What we need is less regulation, not more, and especially not at the federal level when it comes to financing.
The third Federal Reserve attempt was successfully enacted in 1913. America had dissolved the first one and, under vehement opposition from President Andrew Jackson, the federal charter for the second one expired. One of the supposed objectives of the Fed is to prevent financial panics like the one in 1907 that slashed the value of stocks in half.
Unfortunately, 16 years after the creation of the Fed, we entered into the most severe economic depression of our nation’s history. It would seem that giving even greater power to the Federal Reserve might create more problems in the long-term than it would solve.

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