The
Mixed Economy in Crisis
by
Anthony Gregory
by Anthony Gregory
 Treasury
Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke
believe the federal government needs far more regulatory power.
Geithner has proposed a new agency with the power to seize and control
non-bank financial institutions. This, he says, would have made
the AIG bailout cheaper. So would have not having a bailout at all,
but surely he would not take that option seriously.
Geithner is
capitalizing on the public outrage over the AIG bonuses. The
Washington Post quotes Geithner as saying, "The issue
of excessive compensation extends beyond AIG and requires reform
of the system of incentives and compensation in the financial sector."
The Post reports:
 "In
making his case for regulatory reform, Geithner told the committee,
'AIG highlights broad failures of our financial system. Our regulatory
system was not equipped to prevent the buildup of dangerous levels
of risk.' He said the federal government lacks the legal means at
present 'to manage the orderly restructuring of a large, complex
non-bank financial institution that poses a threat to the stability
of our financial system.'"
Bernanke echoes
this concern. "AIG highlights the urgent need for new resolution
procedures for systemically important nonbank financial firms,"
the
Chairman says. "If a federal agency had had such tools
on September 16, they could have been used to put AIG into conservatorship
or receivership, unwind it slowly, protect policyholders, and impose
haircuts on creditors and counterparties as appropriate."
 We
know that for generations, the federal government has been regulating
finance to the hilt, setting interest rates, monopolizing money
and claiming it was managing the business cycle so another depression
would never come. Most people in charge thought nothing was amiss
with the unstable financial bubble over the last several years.
The central planners did not foresee this recession, and yet now
say had they had more power, they would have steered the economy
away from the problems now visible. Geithner, who was intimately
involved with the bailouts late last year, even claims that had
he and the other finance bureaucrats and regulators had more powers,
they could have prevented the high bonuses.
Read
the rest of the article
March
28, 2009
Anthony
Gregory [send him mail]
is a research analyst at the Independent
Institute and editor-in-chief of the Campaign
for Liberty. He
lives in Berkeley, California. See his
webpage for more articles and personal information.
Copyright
© 2009 Campaign for
Liberty
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