Paulson’s Big Bang: For Who And What Do You Care?
Paulson made this long expected announcement about residential mortgage regulation. What is relevant? To Who? Irrelevant or indifferent to McCain, this plan is not adding points to McCain. It does not do anything to elevate the pains a lot of people are suffering right now. What is going on?Below is the news from Reuters: http://www.reuters.com/article/bankingFinancial/idUSN3142489220080331
This kind of regulation is not something Democrats are good at. However, putting something like this up front can reduce a lot of fire in this election from the Democrats. So, it does not add points to McCain, it can take a few hits from Democrats. However, after reading the pdf file from Paulson, one may protecting McCain is only a collateral benefit. This piece of work is more about pay back time, paying back to a core constituence.
This overhaul is to take the initiative of repair from the Democrats to the Republicans, in particular, someone who knows the financial industry well. Paulson is not a retail banker. He comes fromt he capital markets. His placed a great emphasis on capital markets, like merging SEC and futures trade commission.
The change regarding exchange traded funds is a good call. But then, how is it related to the purpose of residential mortgage overhaul? Fixing the approval process is needed. And couldn’t this be done in legislation maintenance? Why packaged in such a big fix? It serves the industry more than the purpose of residential mortgage regulation, similarly for expanding the Investment Company Act to permit a new global investment company.
It is probably a good idea to have oversight of broker-dealers and investment advisers offering similar services to retail investors. What about the practice of licenses being licensed to the companies rather than the individuals who actually do the work? That has been the cause of a lot of discrimination lawsuits. Since the licenses are licensed to the companies, this looks more like territorial fighting than “oversight”. Of course, some kind of retail investor protection will be part of the deal.
Of the whole 7 pages of summary, only 0.5 page of it is focused on residential mortgage origination. Another 0.5 page about state banks, payment systems and thrift charter, the real retail customers related issues. Once insurance is added on top, there is 1.5 page of material!
It is true there are other issues involved, such as the new powers to the Fed that has indirect positive consequences to the retail customers as well. However, the meat is in the regulation reduction. And for all fairness, it is about redundancy. But don’t do it in the name of preventing similar mistakes like this mortgage crisis!
Who cares? Of course anyone who has a heavy position in FIs. However, the benefit is more on the bigger guys. The bigger institutions are the ones who have cross jurisdiction issues. The retail level gets affected the most looks like the mortgage brokerages. More details regarding the mortgage origination is needed to see if Home Depot and the like would get affected.
