Friday, June 26, 2009

The Republican Regulatory Reform Plan

The following is the Regulatory Reform Plan proposed by Alabama Congressman Spencer Bachus. The plan effectively touches upon all weaknesses of the current regulatory environment, if one can even claim one exists. The key points:
The Republican plan will be designed to ensure that (1) the government stops rewarding failure and picking winners and losers; (2) taxpayers are never again asked to pick up the tab for bad bets on Wall Street while some creditors and counterparties of failed firms are made whole; and (3) market discipline is restored so that financial firms will no longer expect the government to rescue them from the consequences of imprudent business decisions. The Republican plan seeks to return our regulatory system to one in which government policies do not promote moral hazard, and insolvent financial firms are permitted to fail rather than become wards of the state.

Republicans will oppose plans to empower the Federal Reserve as a new “systemic risk super-regulator,” while at the same time offering solutions to modernize our outdated financial regulatory structure by consolidating agencies with overlapping missions and eliminating gaps that can be exploited by firms seeking to avoid regulatory scrutiny. Rather than massively expanding the Federal Reserve’s mission and further enshrining a failed government policy of rescuing “too big to fail” institutions, Republicans support scaling back the Fed’s authorities so that it can focus on conducting monetary policy and unwinding the trillions of dollars in obligations it has amassed during the financial crisis. When combined with the Obama administration’s reckless “borrow-and-spend” fiscal policy, the vast expansion of the Fed’s balance sheet in recent months arguably represents a far more significant source of “systemic risk” to our nation’s economy than the failure of any specific financial institution.
And these are the specific proposals:
  • Resolving Large, Complex Non-bank Financial Institutions: Bankruptcy, not More Bailouts.
  • Market Stability and Capital Adequacy Board.
  • Regulatory Restructuring.
  • Fundamental Reform of the Federal Reserve.
  • GSE Reform.
  • Credit Rating Agency Reform.
  • Protecting Consumers through Improved Disclosures and Complaint Resolution Procedures.
  • Strengthening Anti-Fraud Enforcement.
All critical points, and voters and readers, regardless of political persuasion, should expect nothing less of the Administration in whatever final form the enacted regulatory change takes.

hat tip Richard Sphere: Related Content
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