Tuesday, April 01, 2008

Wall Street Government

Conservative political principles at their core, we were always taught, promote smaller government, a less intrusive federal authority, multiple checks and balances against abuse of power, respect for states' rights, and the sanctity of contract.

The Bush administration's proposal, announced yesterday, to reform the financial regulatory system actually "drastically" expands the powers of the Federal Reserve; would eliminate the multiple checks and balances provided by smaller agencies; virtually erases more than a century of state regulation of the insurance industry; supplants it with a federal charter system for insurance companies and brokers; and gives federal authorities the power to override and rewrite individual contracts of all kinds.

Oh, and one more thing: when it comes to investing in nationally marketed stock and bonds, it takes away the one major safeguard individual investors have relied upon since the New Deal: "The plan proposes... to reduce the enforcement authority of the S.E.C. in a variety of ways and hand that authority instead to industry groups."

In other words, stock touts and hot room bond jockeys that prey on the ordinary consumer get to police themselves. Now, that is a recognizable conservative principle. It's the same one that helped bring on the Great Depression and that has a lot to do with today's financial crisis.

The Bush administration's plan to "reform" the financial system, as Secretary of Treasury Henry Paulsen candidly admits, has nothing to do with the current financial crisis.
“Some may view these recommendations as a response to the circumstances of the day,” Mr. Paulson said. “That is not how they are intended.”
Indeed, they aren't. If anything, the administration's proposals, which are more than a year in the making, reflect an ideological commitment to not much more than governance "of America, by Wall Street, for Wall Street."

That's exactly the opposite of what is needed. As Sen. Chris Dodd (D-Conn.) puts it, "[T]he Fed helped create this crisis by ignoring the red flags as far back as five years ago. It does not make sense to give a bigger shovel to the very people who helped dig us into this hole.”

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