I see the proposal by the FED / Treasury on a couple of different levels.
The Bush administration has to do something before they loose control of the issue to the Democratic Congress. The issue of a 30 bil "bailout" for BSC while the housing market continues to effect Joe Public is like red meat for the Dems.
The Fed's rescue of BSC moved (especially taking in 30 bil of toxic paper) into an area of Wall Street that has been touched since possibly the 30s. Nobody will know for at least a couple of years if that 30 bil will take a big hit, break even, or even make the FED some money ... but my money is that a couple of years from now Congress will be appropriating some (maybe a lot) money to help cover the FEDs loss on 30 bil loan.
If the Federal Gov is going to spend 30 bil in loan gaurantees then some type of control needs to be put in place. Whether those controls are inforced effectively or enforced at all is another whole debate. The banking and investment world has changed significantly in the past 30 years and this crisis is going, I hope, to at least help the regulators to institue new rules that match the banking and investment world of 2008.
Even more important then rewriting the regulations for Wall Street is revising the regulations for mortgages. If we are going to live in a world of securitized loans, then rules need to be put in place that ensure that all involved in the loan hold some responsiblity (i.e. they are on the hook for how that loans performs) for the loan. The root of the entire housing problem and credit crisis comes down to when the people who orginated loans realized they had no financial stake in the outcome of the loan ... PARTY TIME!
I tend to be netural on the subject of regulation. To little regulation and a few make the world a terrible place for the rest of us to live in. To much and you living in the Soviet Union. Wall Street is always going to have regulation. How much regulation and whether it is current to the situation are the keys.
CFMTrader
The Bush administration has to do something before they loose control of the issue to the Democratic Congress. The issue of a 30 bil "bailout" for BSC while the housing market continues to effect Joe Public is like red meat for the Dems.
The Fed's rescue of BSC moved (especially taking in 30 bil of toxic paper) into an area of Wall Street that has been touched since possibly the 30s. Nobody will know for at least a couple of years if that 30 bil will take a big hit, break even, or even make the FED some money ... but my money is that a couple of years from now Congress will be appropriating some (maybe a lot) money to help cover the FEDs loss on 30 bil loan.
If the Federal Gov is going to spend 30 bil in loan gaurantees then some type of control needs to be put in place. Whether those controls are inforced effectively or enforced at all is another whole debate. The banking and investment world has changed significantly in the past 30 years and this crisis is going, I hope, to at least help the regulators to institue new rules that match the banking and investment world of 2008.
Even more important then rewriting the regulations for Wall Street is revising the regulations for mortgages. If we are going to live in a world of securitized loans, then rules need to be put in place that ensure that all involved in the loan hold some responsiblity (i.e. they are on the hook for how that loans performs) for the loan. The root of the entire housing problem and credit crisis comes down to when the people who orginated loans realized they had no financial stake in the outcome of the loan ... PARTY TIME!
I tend to be netural on the subject of regulation. To little regulation and a few make the world a terrible place for the rest of us to live in. To much and you living in the Soviet Union. Wall Street is always going to have regulation. How much regulation and whether it is current to the situation are the keys.
CFMTrader
