Not liking the request for yet another layer of bureaucracy in this speech. “More” isn’t the answer. Would more regulators have caught Madoff? No. They had everything they needed to catch him.
A bit of a rant……
I think we’d all have to agree that turf wars/ass covering always take precedent in these situations. The thought process is that by putting all the regulators together in a room, they will catch problems as before they arise. Here is my problem with that. If, on their own, there weren’t any of them sounding alarms before this all blew up (housing, RMBS, CMBS, CDS etc), do we really think that by simply putting the same people together in a room they are suddenly going to become smarter or more diligent? Me either…
What will end up happening is the “consensus wins” and in this vein, those voices who may have previously spoken out will be silenced. Large groups diminish the individual’s responsibility/authority. What we need to do is the opposite. Make the individual agencies more responsible and hold them more accountable. Chances are then we will hear more from them.
Want the SEC to catch more criminals? Give the cops some skin in the game. Give them a % of what they uncover. You’ll get more qualified/aggressive cops if the pay is commensurate with performance rather than the 9-5 clock punchers than seem to permeate it now. Rather than going heavy with more regs and layers, going lighter with more nimble and incentive driven ground troops is the better way to go.
Every crisis spawns more rules, more regulators and more bureaucracy and does not succeed in catching the next bubble/crisis. It is time for a different response.
I can’t help but notice the highly regulated banks/insurance companies/GSE’s are the ones that caused this mess and the essentially unregulated hedge fund industry while taking its lumps over the past year, has essentially survived in tact. Why would I want more rules and regs?
My problem is that the more gov’t gets it hands into an area (Fannie, Freddie, Post Office, Social Security, Medicare/Caid etc..) that it competes with the private sector, the more likely failure (going bust) is unavoidable. Our most heavily regulated industry (finance) seem to be the one who repeatedly poses systemic risk while those more lightly regulated will have their individual failures that simply cleanse the poor performers from the system. It seems Bernanke is advocating for a larger gov’t role, I just do not see how this ends well.
Here is the testimony:
bernanke20091001a