Bush Tries To Clean Up the Mess He and His Business Buddies Created

It's a start, I guess.

WASHINGTON — The Treasury Department will propose on Monday that Congress give the Federal Reserve broad new authority to oversee financial market stability, in effect allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system.

The proposal is part of a sweeping blueprint to overhaul the nation’s hodgepodge of financial regulatory agencies, which many experts say failed to recognize rampant excesses in mortgage lending until after they set off what is now the worst financial calamity in decades.

Democratic lawmakers are all but certain to say the proposal does not go far enough in restricting the kinds of practices that caused the financial crisis. Many of the proposals, like those that would consolidate regulatory agencies, have nothing to do with the turmoil in financial markets. And some of the proposals could actually reduce regulation.

Can't say I'm surprised; since Reagan, reducing regulation has been the GOP's M.O. (along with lowering taxes regardless of the economic climate).

While the plan could expose Wall Street investment banks and hedge funds to greater scrutiny, it carefully avoids a call for tighter regulation.

The plan would not rein in practices that have been linked to the housing and mortgage crisis, like packaging risky subprime mortgages into securities carrying the highest ratings.

The plan would give the Fed some authority over Wall Street firms, but only when an investment bank’s practices threatened the entire financial system.

And the plan does not recommend tighter rules over the vast and largely unregulated markets for risk sharing and hedging, like credit default swaps, which are supposed to insure lenders against loss but became a speculative instrument themselves and gave many institutions a false sense of security.

On the surface most of this sounds nice, but when you realize that without "written in stone" regulation, it will be up to the Fed to keep things under control. What happens when a future president appoints the "Brownie" of finance to this post? I shudder to think.

Also, there's this:

Under the Treasury proposal, Fed officials would be allowed to examine the practices and even the internal bookkeeping of brokerage firms, hedge funds, commodity-trading exchanges and any other institution that might pose a risk to the overall financial system.

That would be a significant expansion of the central bank’s regulatory mission, which has been limited primarily to supervising commercial banks.

Since I like pointing out irony, isn't it funny that a conservative Republican White House is proposing that the "government" needs to be able to sneak a peek into "the internal bookkeeping of brokerage firms, hedge funds, commodity-trading exchanges and any other institution" just because they "might pose a risk to the overall financial system?" If Sen. Obama and/or Sen. Clinton had proposed this, conservatives (and a few libertarians) would be calling for their head(s).

But Barney Frank and Chuck Schumer (neither a big fan of the Bush Administration) seem warm to the proposal; so how bad can it be?