Obama's Explosion of Regulation

Obama began his war on private enterprise in America. His first target was to rein in pay across the private sector. Then came credit card companies. Now its a massive attack on the entire financial industry of our nation. Two days ago, “A New Foundation: Rebuilding Financial Supervision and Regulation,” running 89 pages in length and instituting the most far reaching regulation of our financial industry since at least the New Deal. Washington Wire condensed the report to the following:

For the regulation of financial firms, the proposal:

- Creates Financial Services Oversight Council, which would coordinate activities among regulators, replacing the President’s Working Group.

- Ensures that any financial firm big enough to pose a risk to the financial system would be heavily regulated by the Federal Reserve, including regular stress tests.

- Says the Fed will have to “fundamentally adjust” its current supervision to more closely watch for systemic risks.

- Allows the Fed to collect reports from all U.S. financial firms that meet “certain minimum size thresholds.”

- Gives the Fed oversight over parent companies and all subsidiaries, including unregulated units and those based overseas.

- Says the Treasury will re-examine capital standards for banks and bank-holding companies.

- Tells regulators to issue guidelines on executive compensation, with the goal of aligning pay with long-term shareholder value, including a re-examination of the utility of golden parachutes.

- Creates a new bank agency, the National Bank Supervisor, and kills the Office of Thrift Supervision. The new agency will look over national banks, including federal branches and agencies of foreign banks.

- Forces industrial banks, non-bank financial firms and credit-card banks to become more traditional bank holding companies subject to federal oversight.

- Kills the SEC program that supervised Wall Street investment banks.

- Requires hedge funds, private-equity funds and venture-capital funds to register with the SEC, allowing the agency to collect data from the firms.

- Subjects hedge funds to new requirements in areas such as record keeping, disclosure and reporting. The oversight would include assets under management, borrowings, off-balance sheet exposures.

- Urges the SEC to give directors of money-market mutual funds the power to suspend redemptions, and take other action to strengthen regulation of money-market mutual funds to prevent runs.

- Beefs up oversight of insurance by creating an office within the Treasury to coordinate information and policy.

- Kicks off a process by which the Treasury and the Department of Housing and Urban Development will figure out the future of mortgage giants Fannie Mae, Freddie Mac and the federal home-loan banks, which could include winding them down, returning them to the private sector or refashioning them as public utilities.

For the regulation of financial markets, the proposal:

- Brings the markets for over-the-counter derivatives and asset-backed securities into a regulatory framework, strengthens regulation of derivatives dealers and forces trades to be executed through public counterparties, such as exchanges

- Toughens the regulatory regime, including more conservative capital requirements and tougher rules on counterparty credit exposure.

- Strengthens laws designed to protect “unsophisticated parties” from trading derivatives “inappropriately.”

- Gives the Fed more power over the infrastructure that governs these markets, such as payment and settlement systems.

- Harmonizes the powers and authority of the SEC and CFTC to avoid conflicting rules relating to the same products or time-wasting turf battles over who should regulate what.

- Tells the SEC and the CFTC to deliver a progress report by September.

- Requires that originators, for example, mortgage brokers, should retain some economic interest in securitized products.

- Directs regulators to “align” participants’ compensation with the long-term performance of underlying loans.

- Urges the SEC to continue its efforts to improve the transparency and standardization of securitization markets and recommends the SEC have clear authority to require reporting from issuers of asset-back securities.

- Urges the SEC to strengthen its regulation of credit-rating firms, including disclosing conflicts of interest, better differentiating between structured and unstructured debt and more clearly stating the risks of financial products.

- Tells regulators to reduce their reliance on credit-rating firms.

For regulations protecting consumers and investors, the proposal:

- Creates a new agency, the Consumer Financial Protection Agency, with broad authority over consumer-oriented financial products, such as mortgages and credit cards. The new agency would work with state regulators.

- Gives the new agency power to write rules and levy fines based on a wide range of existing statutes.

- Proposes new authority for the Federal Trade Commission over the banking sector, in areas such as data security.

- Creates an outside advisory panel to keep an eye on emerging industry practices.
Says the new agency should play “a leading role” in educating consumers about finance.

- Gives the new agency authority to ban or restrict mandatory arbitration clauses.

- Improves transparency of consumer products and services disclosures.

- Says the new regulator should have authority to define standards for simple “plain vanilla” products, such as mortgages, which would have to be offered “prominently” by companies.

- Proposes the government “do more” to promote these simple products.

- Beefs up the agency’s power to regulate unfair, deceptive or abusive practices.

- Imposes “duties of care” that will have to be followed by financial intermediaries, such as stock brokers and financial advisers.

- Regulates overdraft protection plans, treating them more like credit credit-card cash advances.
- Promotes access to credit in line with community investment objectives.

- Strengthens SEC’s framework for investor protection by expanding the agency’s powers to beef up disclosures to investors, establish a fiduciary duty for broker-dealers who offer advice and expand protection for whistleblowers, including a fund that would pay for certain information.

- Requires non-binding shareholder votes on executive compensation packages.

- Requires certain employers to offer an “automatic IRA plan” for employee retirement, with investment choices prescribed by regulation or statute.

- Urges exploration of ways to improve participation in 401(k) retirement plans

To give the government more tools to manage crises, the proposal:

- Creates a mechanism that allows the government to take over and unwind large, failing financial institutions.

- Creates a formal process for deciding when to invoke this power, which could be initiated by the Treasury, Fed, FDIC or SEC.

- Gives authority to make the final decision to the Treasury, with the backing of other regulators.

- Gives the Treasury the authority to decide how to fix such a failing firm, whether through a conservatorship, receivership or some other method.

- Taps the FDIC to act as conservator or receiver, except in the case of broker dealers or securities firms, in which case the SEC would take over.

- Amends the Fed’s emergency lending powers to require prior written approval by the Treasury Secretary.

In the international sphere, the proposal:

- Recommends international regulators strengthen their definition of regulatory capital to improve the quality, quantity, and international consistency of capital.

- Recommends that various international bodies implement the Group of 20 recommendations, including requiring banks to hold more capital in good times to protect against downturns.

- Urges that national authorities standardize oversight of credit derivatives and markets.

- Recommends national authorities improve cooperation on supervision of globally interconnected financial firms.

- Recommends regulators improve the way firms are unwound when they straddle borders.

- Recommends strengthening the Financial Stability Board.

- Urges other countries to follow the U.S. lead and: subject systemically significant companies to stricter oversight; expand regulation of hedge funds; review compensation practices; tighten rules governing credit-rating firms.

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Obama Moves Towards Nationalization Of The Banking Industry

With the announcement that the Obama administration is refusing to accept repayment of TARP funds and instead intends to convert those funds to an equity position, giving the government ownership stakes in the banks, socialism - and I am talking full blown socialism of the Hugo Chavez, Fidel Castro, name your favorite third world tin pot dictator variety - is now an actual risk in America.

The federal government, through market interference directed at social engineering, beginning with Clinton and protected at every turn by Democrats during the Bush Administration, gave us the subprime crisis. The fix we are in today never occurs without that, and that is irrespective of Wall St. What this crisis led to in October, 2008 was a massive credit crunch and liquidity problem. The government stepped in with TARP loans to provide government assistance, attaching a slew of strings to the money. At the time, the stated goal was to inject liquidity into the system with the onerous strings attached on such things as executive compensation in order to provide a motivation for banks to repay the funds as soon as possible.

The details of how the TARP money was used in each case is sketchy at best. Some was used as loans, some apparently to purchase preferred stock with no voting rights, etc. What was not done with the money, at least beyond AIG, was to buy a true ownership position in the banks that would have provided voting rights in the management of the company. The latter would be a major step towards nationalization of our financial industry. And indeed, that now seems to be what is on the cusp of happening.

Within the past week, we have seen some of the major banks publicly state that they wish to repay the TARP funds. The Obama government has said "no," we think you should keep the money - with all the strings attached - and perhaps we might take ownership of your company by forcing you to convert the loan to common stock. Read it here and here. In other words, not only would all of the onerous strings attached to TARP funds become permanent - to the detriment of our financial sector - but the U.S. government would effectively take ownership of our major banking institutuions.

That is really breathtaking - as is the fact that this is being reported off the front pages in our MSM. Under no circumsatances should the U.S. government be allowed a voting interest in our major banks nor should the TARP strings extend another day beyond an institutions stated desire and ability to repay those funds in full. Further, if the government wishes, they can easilly change how TARP funds are carried on the books of banks with a simple change to the regulations. The suggestion that only by converting loans to common stock can liquidity be increased is so transparent as to be laughable.

This gets worse and worse.

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Dodd, ACORN and The Penultimate Screwing Of The Taxpayers

The left - those wholly responsible for the subprime crisis - are complaining on every outlet that they "had a deal" that would have passed into law to allow the rescue of the financial industry but for the intercession of John McCain. But the devil is in the details. One of those details is that the left would have used this financial rescue operation as a form of massive public funding for progressive advocacy organizations.

The "deal" to fund the rescue operation of our financial sector that Barney Frank and Chris Dodd proposed would have transferred fully 20% of the proceeds returned from the rehabilitation of assets to the Housing Trust Fund - a slush fund the Dems use to fund "progressive organizations," and in particular ACORN, itself an organization that should be prosecuted under the RICO laws. In other words, Chris Dodd and Barney Frank would have further screwed our nation on a massive scale in order to fund a criminal organization dedicated to putting in power the people who created this fiscal catastrophe. If you are feeling homicidal about now, trust me when I say I suspect there is a lot of that going around at the moment.

I have been waiting for details to emerge of why the "deal" fell apart. I made the mistake of watching CNN last night rather than Fox and missed Sen. Lindsay Graham. He explained why this deal did not occur. Hot Air has the whole story. It is a must read.

ACORN is as a corrupt organization as there is or has been in American politics. Why and how it is still extant given its incredible history of vote fraud is a mystery to me. That said, the Dodd plan would involve a massive transfer of wealth to the HTF, the organization the left has used to funnel virtually all of ACORN's funding.

Any transfer of public funding to ACORN from this bailout would have nothing to do with rehabilitating mortgages or people under threat of foreclosure. It would have nothing to do rehabilitating the financial sector. It would have everything to do with funding vote fraud by the left. This is one for McCain and the right to both shout from the rooftops and fall on their sword over.



Prior Posts (oldest to newest)

1. McCain, The Fannie and Freddie Crisis, and Obamafuscation - Obama and the entire Democratic Party are trying to blame Republicans for the subprime crisis. But this crisis was created by Bill Clinton and protected against Republican efforts to reign it in over a decade – until it failed, nearly pulling out entire economic system into a depression.

2. A Washington Post Front Page Hack Job - The Washington Post does a hit job on McCain, grossly distorting his record on regulatory matters and ignoring his cosponsoring of legislation to establish much stronger regulation of Fannie Mae and Freddie Mac.

3. Dodging a Depression - The NYT and WSJ document just how serious is the subprime crisis. Quite literally it brought us to the point of a complete and catastrophic stoppage of our financial systems as institutions lost confidence in their fellow institutions. This was not a stock market crash, it was a lending and credit crash. The WSJ describes the events of the week leading up to the crisis point.

4. Obama & The "Family" Of Fannie Mae - Documenting Obama’s relationship to Fannie Mae.

5. The Origins – And Foreseeability – Of the Subprime Crisis - A 1999 article in the NYT describes the Clinton Administration forcing subprime loans onto America and also forecasts that this will create a house of cards that will fall apart in a down market.

6. Covering The Left’s Fannie - The NYT tries to play up old ties of a McCain campaign worker with Fannie Mae while minimizing the fact that McCain himself, in 2005, co-sponsored legislation that may well have prevented the fiscal crisis we are in now.

7. The Left’s Subprime Meltdown - A post by the Anchoress discusses this subprime crisis as a creation of the left and a system that was protected to the end by the left. She adds additional sites, quotes and links to explain the mosaic.

8. Fannie & Freddie, McCain & Obama, Subprime & Wall St.The WSJ discusses both how the subprime loan market came about and how Democrats, including Obama, were both the cause of the problem and the roadblock to a solution that would have averted this catastrophe. Dafydd at Big Lizard's explains how Mortgage Backed Securities worked on Wall Street.

9. A Doddering Fool & Charlatan - Chris Dodd is up to his ears in the subprime crisis. With our economy teetering on an actual depression due to the Fannie/Freddie/subprime loan crisis, it was not merely surreal to watch Senator Chris Dodd chair an emergency hearing of the Senate Banking Committee to evaluate the Treasury's proposed rescue plan, it was obscene.

10. Finally – Oversight - The FBI has finally announced criminal investigations at Fannie and Freddie.

11. When Will They File As A 527 – The NYT continues its wholly biased reporting on the subprime crisis, refusing to report on the genesis of the crisis and instead, reporting on the relationship between Fannie Mae and Rick Davis of McCain’s campaign team.

12. McCain The Chessmaster - Opining on the potential risks and rewards of McCain's decision to cancel campaigning, return to Washington to take part in negotiations over a response to the subprime crisis, and tentatively cancel the Friday debate.

13. The President Addresses The Nation - Bush explains the stakes involved for America with the subprime crisis.

14. McCain The Chessmaster Part II - McCain was responding to a 3 a.m. phone call in returning to Washington. He is given political cover and support by Bill Clinton.

15. A Spotlight On The Left's Subprime Crisis - A video summary of the origins of the subprime crisis with lots of footage of Rep. Barney Frank and others protecting Fannie Mae from regulation by the Bush Administration and McCain.

16. WaMu Swallowed Up In The Left's Subprime Swamp - Washington Mutual goes under because of toxic mortgage debt.

17. Great Moments In Leadership - Obama phones it in on the subprime crisis.

18. The "No Deal" - McCain Responds - The left is blaiming McCain for failure of a deal on the subprime crisis. McCain answers in a memo.

19. Dodd, ACORN, and the Penultimate Screwing of the Taxpayers - The left, the people responsible for the subprime crisis, proposed a deal that would have used the return on rehabilitated investments not for the benefit of taxpayers but to fund progressive advocacy organizations that are fundamentally corrupt.

20. Krauthammer On The Subprime Crisis: Time For A Return To Public Executions - America is livid over this fiscal crisis and wants a pound of flesh to satiate its cravings before beginning the job of putting our financial house back in order. Krauthammer things we should give it to them and suggests a return to the auto de fe, this time as a reality show.21. The Subprime Crisis, Dems, Obama & McCain - a great video giving the history of the subprime crisis.

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