Power And Dollar

Anyone Understands Geithner?

Little reaction (criticism, actually) is out there considering the scale of Geithner’s proposal unless everyone is used to the lack of details from Obama Administration and is waiting for the real deal or no one understood what just happened. The financial weapons of mass destructions, along with aggressive and unethical lending practices, lack of regulation in some areas (say appraisal), + many more are to blame. Geithner’s solutions reacted to them. However, no one really asked if Geithner’s way makes sense. I am writing to argue that systemic risk regulation only requires stronger enforcement from or even enhancement of other existing regulation.

The best synopsis of Geithner’s proposal, so far, that I can find is this one from Reuters. However, the best one to articulate the central ideas of the proposal is Times. Four tools are actually these: prevention (safety and soundness regulation), reaction (market insurance, FDIC like), bailout (Federal Reserve) and exit (IndyMac). Please don’t think an article that lists more central themes is a better article to read, like this one.

Two of the four tools a government can have already been deployed: protect and bailout. In fact, the administration already made up the rules as they went along. Prevention and exit require more legislation to make them work (and budget too).

Combating a commercial entity that is too big is the central idea of anti-trust legislation. Anti-trust is tricky for Justice to pursue and tricky to defend. However, it is no more difficult to enforce if one is “too big to fail” or differentiate between “too big to fail” versus “too big”.

This “Too Big” can be applied and extended to every industry. In fact it is being extend to the auto industry. Geithner is creating a framework for the United States to become Venezuela in the north.

Geithner is not purposefully exploiting a political opportunity (Democrats are if they are tucking a truck loads of other reforms in this crisis). He simply believes governments work. Otherwise, he would not be a civil servant for this long. However, politicians love to along on this one since the decisions to bail out and take over are ultimately political. The success of this proposal will extend their powers (and more political contributions). What will really save the risk of extending the power of the government is to re-examine anti-trust.


March 27, 2009 - Posted by | Current Events, 美國, politics, wordpress-political-blogs

1 Comment »

  1. […] Too Big To Be Obama administration is finally using anti-trust as a treatment for “Too big to fail”.  That is exactly what this blog asked for: http://poweranddollar.com/2009/03/27/anyone-understands-geithner/ […]

    Pingback by Too Big To Be « Power And Dollar | May 11, 2009 | Reply

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