McClatchy: After 25 years, economists press for regulation...

[babylonsister]

In reversal, Washington seeks more financial regulation

By Kevin G. Hall | McClatchy Newspapers
WASHINGTON —



After at least a quarter-century of pressing for deregulation of financial markets, economists and members of Congress are pushing for renewed regulation in hopes of heading off a collapse of the global banking system.

Federal Reserve Chairman Ben Bernanke on Tuesday became the latest official to call for additional government powers, saying that the Fed should be given more authority to determine how much cash investment banks are required to keep in reserve and to monitor how they manage the risk involved in their investments.

When the head of the Fed calls for greater financial regulation, echoing Treasury Secretary Henry Paulson, a former Wall Street titan, it's significant. It's also a repudiation of the long-held view that markets alone can best regulate themselves. Whether regulations will be successful is an open question.

"I think it is going to be a turn back towards more regulation, but it's not going to be so easy," said Barry Bosworth, a presidential adviser in the 1970s who's now a senior economics fellow at the Brookings Institution, a center-left research center. "I think they've got a dilemma that some of these new financial instruments, and markets, have become so complex. If they continue to let them operate, it’s not clear that the regulators will be able to keep up."

Vincent Reinhart agrees. Until recently he was the chief economist of the Fed's interest rate-setting Open Market Committee. Reinhart, too, thinks that significantly stronger regulation is coming.
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http://www.mcclatchydc.com/227/story/43476.html

[Fenris]

1. I think you mean "reregulation" in your headline.

Although I don't know if that's a proper word. Sounds good, though!

[TahitiNut]

2. Ironic, isn't it?

When I worked in the banking industry back in the 70s, I was told the best reason for regulating banks: because bankers are too stupid to do business well without them. Wow, is that the truth!

[Lasher]

3. Hey, what happened to the invisible hand?

It wasn't too bright, repealing the The Glass-Steagall Act of 1933, huh? How could they have known? Maybe by paing a little attention to basic history lessons in school?

[depakid]

4. Classic

Sad thing is that it didn't take a economic or financial genius to figure that one out. Just a set of honest people looking at the facts.

Garn St. Germaine led to the savings and loan crash- and before the dust had barely settled on that, a new round of irrational deregulation was underway, leading to the repeal of Glass-Steagall.

Then came LTCM http://en.wikipedia.org/wiki/Long-Term_Capital_Management -which was really th writing on the wall.

Steven Pizzo wrote a great piece on this some months ago, and includes some of his prophetic testimony to our Craven Congress:

They Were Warned!

http://www.smirkingchimp.com/thread/13858

[girl gone mad]

5. too late.

The collapse is already happening. Nobody has faith in the US financial system anymore.

[DCKit]

6. They don't want "regulation", they want more free money from the Fed.

The only way to get that NOW is to admit they were bad and need to be watched over - they'll be forgiven and the vault door will magically open to "keep them solvent."

Remember who's writing the rules here kids.

[mmonk]

7. I could have saved them the trouble a long time ago.