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Paulson’s Plan
The first proposal to reform the financial system since the subprime crisis was announced yesterday by Treasury Secretary Hank Paulson. The proposal aims to create a regulatory environment in which "capital can seek out its most productive uses in an efficient matter." Before his time as Treasury Secretary he worked as co-chief executive at Goldman Sachs, where he argued for reduced regulation and consolidation of regulatory agencies. Yesterday's proposal sought to combine regulatory agencies and expand the powers of the Fed.
Snapshot asks, what parts of the Paulson plan will survive?
Treasury Department - Paulson's Blueprint
Cumberland Advisors - The Paulson Report: "Something Old, Something New, Something Borrowed..."
Fortune - Fed Up with the FED
Wall Street Journal - Paulson Plan Begins Battle Over How to Police Market
Financial Times - Paulson's Gamble
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Too Much Power to the Fed
Allocating more regulatory power to the Fed is problematic for two reasons. First, the Fed has a poor track record of overseeing financial markets. Chairman Greenspan's refusal to regulate hedge funds and derivatives contributed to the current crisis. Second, the Fed is, by design, an undemocratic institution. That is fine for monetary policy, which must be insulated from short-term political pressures. Ordinary financial regulations, however, should be written by lawmakers and executive officials who are more closely accountable to the electorate.