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  • Morning Bell: Don't Enable The Financial-Regulatory Complex

    This Saturday, tens of thousands of Americans marched on Washington to protest the unprecedented amount of power being concentrated in Washington, DC under the Obama administration. And even the New York Times admits they have a point: “The government is the nation’s biggest lender, insurer, automaker and guarantor against risk for investors large and small. Between financial rescue missions and the economic stimulus program, government spending accounts for a bigger share of the nation’s economy — 26 percent — than at any time since World War II.”

    And on the Sunday New York Times op-ed page, George Mason University professor of economics Tyler Cowen writes:

    For years now, many businesses and individuals in the United States have been relying on the power of government, rather than competition in the marketplace, to increase their wealth. This is politicization of the economy. It made the financial crisis much worse, and the trend is accelerating. … President Dwight D. Eisenhower warned of the birth of a military-industrial complex. Today we have a financial-regulatory complex, and it has meant a consolidation of power and privilege. We’ve created a class of politically protected “too big to fail” institutions, and the current proposals for regulatory reform further cement this notion.

    President Barack Obama will be pitching those very financial regulatory reforms today from Federal Hall, where the founders once argued bitterly over how much the government should control the national economy. Unfortunately, the blueprint for financial regulatory reform issued by his administration is a detailed mixture of overreaching policy mistakes, missed chances for real reform, blanks that will be filled in later after studies, and a few good ideas.

    The President and Congress should:

    • Avoid Making the Federal Reserve Serve as Systemic Risk Regulator: The Obama Administration proposes to put the Federal Reserve Board in charge of regulating systemic risk, but it is not clear how such regulation would work in practice or even if this method is the best way to approach the problem. Charging a single entity with reducing systemic risk is likely to raise false expectations. It is very doubtful that any systemic regulator will be able to successfully fill this role unless it has almost unlimited powers, and this type of open-ended power would be difficult to constrain and should be resisted.
    • Do Not Create a Consumer Financial Protection Agency: The administration proposes to consolidate existing consumer regulators into a new and very powerful Consumer Financial Protection Agency. This is the single biggest policy mistake in the Obama plan. The proposal assumes that consumers are unable to understand any financial products other than the most simple, basic versions even with detailed disclosures in advance of purchase. This basic contempt for the intelligence of consumers would extend to requiring them to refuse certain basic products before they would be allowed to purchase anything else.
    • Resist Giving the FDIC Resolution Authority for “Too Big to Fail” Financial Firms: Dealing with failing financial companies that could cause risk to the financial system is a valid concern, but the Administration’s approach seems more geared toward facilitating future bailouts and justifying additional intervention. Clearly, a receiver/conservator that can operate the least certain subsidiaries until they can be sold or orderly closed is necessary in order to maximize returns to debtors. But the Treasury plan assumes that the Federal Deposit Insurance Corporation (FDIC) should handle this role rather than allowing the courts to determine a receiver and then supervise it.

    Instead of a Washington-centric top-down approach, the President and Congress should pursue a more modest approach. Rather than giving a government agency the ability to take over and operate large financial institutions, bankruptcy law ought to be modified to accommodate the special problems of resolving these firms and also allow the courts to appoint receivers with the specialized knowledge necessary to best deal with their failure. Instead of creating a regulatory scheme that results in the federal government financing 9 out of 10 new mortgages, Fannie Mae and Freddie Mac should be eliminated. And rather than seeking to micro-manage “too big to fail” financial institutions, it would be better to require them to have more capital than is required for smaller financial institutions.

    Quick Hits:

    Posted in Ongoing Priorities [slideshow_deploy]

    35 Responses to Morning Bell: Don't Enable The Financial-Regulatory Complex

    1. Joyce Jewett-Floyd, says:

      The Capital Police estimated that there were 1.8 million free American's in Washington on Saturday.

    2. Louise Williams says:

      I attended the march in Washington on 9/12. Your information that there were "tens of thousands" marching is erroneous. You were obviously not present and have not bothered to get on Drudge or Glenn Beck.com to see pictures of the event. Read the London Daily Mail. The two million figure is erroneous, also, but there were at least a half million of us…….and I would not be surprised if the true number were a million. We were packed from the Capital to the Washington Monument. It was fabulous and so much more than my friends and I from Texas envisioned. Please, take down that "tens of thousands" message. It is lazy reporting on your part.

    3. Bill Bannan, Silver says:

      VeTO = Vote Them Out!

    4. Reagan Reep, Jackson says:

      From the looks of the crowd it was at least in the millions. Why underestimate the amount? I understand they cleaned up after themselves and left the place neat.

    5. Prevailer76AZ says:

      Absolutely, Fannie Mae and Freddie Mac must be eliminated. People who own the home they have lived in for many years are facing foreclosure because of job loss or cut backs but cannot for some reason qualify for re-fi assistance from those entities. The financial gurus in congress have put our country into extreme distress, often to feed their own greed. While at it, investigate ACORN, starting at the top.

    6. Dennis A. Social Cir says:

      This is waht happens when the government is being pushed toward socialism, and obama is setting himself up as the dictator of this country. The dems and obama are determined to see this country change, and not for the best.

      The founding fathers of this country had experience first hand the rule of one person, and were determined when writing the constitution that this would not happen here, well they must be turning over in their graves now, as the people of this country are being spoon fed the BS of the dems and obama. We the people need to wake up and soon, as this country is on the path of destruction!

    7. Harry, Illinois says:

      Congress is blindly relinquishing it's legislative powers by allowing Mr. Obama to create all of these Czar positions. The President will soon become the Executive and Legislative Branch all rolled into one if they continue to allow this to happen. He now currently has approximately 32 Czars. Based upon the above information he will be creating a few more. Better watch out or before you know, he will start creating Judicial Czars to over ride our Supreme Court. How blind can our Representative be to allow this to happen?? He is clearly overstepping his boundries.

    8. Ken Jarvis - Las Veg says:

      THIS IS THE "power being concentrated in Washington, DC"

      that want Obama to FAIL.



      Detainees once held at U.S.-controlled prisons.


      Thomas Sowell


      Heritage foundation


      Al Qaeda

      Osama bin Laden

      Fox News

      Andrew Taylor – Cincinnati

      Ryan L. Natschke – Chicago

      Matt Wells

      Charmber of Commerce

      Cayce Scales

      Ann Coulter

      Charles Krauthammer

      Stace Triebwasser (Gulfport / Biloxi, MS)

      Forbes Magazine

      REMEMBER -



    9. Laura Lee Wierzbinsk says:

      Please, will you stop saying that tens of thousands of people were at the rally in DC. There were HUNDREDS OF THOUSANDS…POSSIBLY A MILLION AND A HALF. I was there…paid my own way with three friends….there were people of all ages and colors etc…we were still coming for three hours after it was supposed to begin and we stretched from the White House to the Wash. monument with side roads and highways backed up and the metro packed like sardines…..please give us the credit we deserve. Thank you.

    10. Paul Schwab, Centerv says:

      The government must stay out of the Health Care business. Our problem is with our Representatives in Washington. Most of the Senators and Congressmen have been in power TOO LONG and need to be replaced. We need TERM LIMITS; it is urgent that we propose TERM LIMITS in Congress, and the Supreme Court. It must start on a local level, then go to the State. The State, if we secure enough of them, can force the issue in Washington. It will take time, a lot of time, but it can be done. We need more citizens to become involved in Liberty groups and speak out. I frankly believe that our current Administration has awakened a SLEEPING MAJORITY, who will not stand for any more of their "take over" projects. Give me Liberty or give me death! Do not tread on us Washington. You were not elected to rule the world. You were elected to serve the people, not the people to serve you!

    11. jim smith says:

      All the sloganeering that persists is alarming. Today we have:

      "systemic risk"

      "too big to fail"

      "my plan" (which will soon be found inside Amelia

      Earhart's monogrammed courier pouch)

      "if you like your doctor".

      Purposely omitted were "circling the bowl" and

      "If you disagree with Obama, you're a racist".

    12. Ivona, San Diego says:

      What you wrote makes a perfect sense. Although there should be a stronger consumer protection agency (but not so big that it would take over the economy). Sadly, a lot of people are either ignorant, don't take time to read and understand small print, or don't care about long-term consequences. A typical, American, consumer mentality. Somebody has to protect them from themselves. :)))

    13. JD Pullman says:

      A thought… If a person is fined for NOT having health insurance and they don't pay the fine, would they end up in jail?? If that's the case, then there's 100% chance that a lot of people will end up behind bars for simply not having health insurance!!

    14. J. White says:

      I read with trepidation the very idea that the unprincipled scum in DC have usurped OUR nation's government and now its monetary system. Are they all equally as guilty? No, but those who are not do not speak up- unless one counts Joe Wilson…Go, Joe!!

      I find it amusing that the Narcissist wants to mouth words that HE is "Lincolnesque" What a joke. He and his cronies are trying to manage your very lives by controlling YOUR money. Lincoln spoke very clearly about NOT taking the wealth of a working man and giving it to a person who is too lazy to work. Check it out.

      Of course another old phrase applicable here: "The power to tax is the power to destroy".

      By allowing the anti-Constitutionists in DC and elsewhere in the USA to ignore its directives, we are in for a rough ride until WE retake control of OUR government. The healthcare brouhaha is an example of taking our attention off what these insidious people are treying to do.

      Trying to become a dictator an extreme oligarchy? Please recall to mind the Ceaucescu's of Romania. Extreme? Yes, but something philosophically on that order, the conservatives must take over the reins of OUR government and never ever again relinquishing them to any liberals or leftists- now one and the same is in order.

    15. Whicket Williams Kin says:


      If you are not in a position to RAT out the corruption, you must be a scorekeeper. Lets keep up the pressure on all fronts until corruption is eradicated, and corrupt officials are in the penitentiary

    16. Linda Carlsbad, CA says:

      While President Obama has everyone working in Washington on his take over of our Health Care. He is busy taking over the rest of our economy, by his changing policies. Maybe, just maybe the news media will wake up and see this cannot be good for America, and their business may be next!

    17. Whicket Williams Kin says:


      If WE concentrate on eradicating Corruption, EVERYTHING else will fall right in line. It's ALL about the MONEY. People!!!

    18. Bob Veigel, Arlingto says:

      Do not enable the government, period. It is too big, it is too power hungry and controlling, it is too extravagant, it is too arrogant, it is too tax happy and is sucking the life out of citizens and businesses, it is too unregulated and has placed the Nation in virtual bankruptcy because of unnecessary and reckless deficit spending and unless and until it recognizes this destructive behavior, the path to disaster will continue. And if it does not take appropriate action to correct, it is my belief the people will rise up and take action that will correct the problem. Is a 2nd revolution in our future?

    19. Whicket Williams Kin says:

      I sincerely hope those in the intelligence community who are being attacked are taking steps to prove corruption in this administration as a means of self defense, as they are better positioned to find the truth than I am.

    20. Pete Kleff, Cypress, says:

      Over the years I have observed the deterioration of free market concepts. Today the economy features more fascist concepts than free market. The very idea that any company is "too big to allow it to fail" is in the minimum anathema. Unless free market principles come to the fore again, the future of the U.S. may indeed be bleak.

    21. Joe Lang, Chatham, N says:

      I believe that conservatives agree that there is a liberal bias in most of the news media. Morning Bell fromThe Heritage Foundation is a breath of fresh air in the midst of this situation. I must object, however to your reference to "tens of thousands" as the size of the crowd at the historic 9/12 March on Washington. This is the kind of wording used in most of the news media. It is a woefully inadequate description of the crowd. There were hundreds of thousands in Washington for this event. and there are some estimates that the crowd exceeded one million. This inspirational happening was mostly ignored by the media, the same media that fawned all over Cindy Sheehan and her fellow straglers picketing President Bush. It is only in articles from the British press where I have seen any reportage that gave an accurate description of the enormity of what occurred in Washington last Saturday. My wife and I were among the multitudes who showed up to protest the growth of government, the growth of our national debt, and the diminuation of our liberties and freedom. What I observed was a gathering of people just like us, people who had never gone out of our way to protest anything, and who had only a tangental, if any, role in the political process other than voting, and offering occasional financial support to favored candidates. There were few signs that were not home made, and those with a lack of taste and sensitivity were few and far between. This was a demonstration of democracy and freedom at its best, and it is truly unfortunate that the efforts and commitment of these good and caring people have been given so little attention and exposure. Were it not for Fox News, it would almost be like nothing had happened last Saturday in Washington. Please get the word out about how many really showed up!

      Joe Lang

    22. Dave, Laguna Niguel says:

      I am very disturbed by "HERITAGE" misrepresenting the HISTORIC MARCH on Washington DC. We are USED to this sort of thing from the STATE RUN MEDIA, but YOU PEOPLE?! I am withholding any more donations until I see you GET WITH THE PROGRAM! I thought you were a bastion of THE TRUTH! I have yet to see any mention of this march on ANY news program! Totally ignored. Of course if there were 100 illegals protesting for their RIGHTS in LA, it would have been covered by every news program and reported THOUSANDS were present! As I continue to say, WE NEED TO MARCH ON THE TV STATIONS WHICH HOUSE THESE SO-CALLED JOURNALISTS/REPORTERS! These people should be dragged into the streets and told to GO GET A REAL JOB and find out how the rest of us are struggling under this SOCIALIST ADMINISTRATION(coupled with all the business-damaging regulations brought on by the DEMOCRATS through the years) which absolutely REFUSES to create private sector jobs! Everyone can not work for the government! The USSR already tried that!

    23. jim toledo says:

      I wish I could have been there, but, what a sight to see; talk about democracy in action. It was great to see a sea of Americans standing up for what they believe in; our country and the Constitution. It was amazing, to me, to know that this was a grass roots event, although there were some local organizers, this whole thing was put together by the people themselves, no recognizable true leader, who are just feed up. Again the mainstream media is AWOL on covering this monumentous event and they, NBS, CBS, ABC, CNN, MSNBC should be ashamed to call themselves journalists. Pathetic.

    24. Al Reasin says:

      I was there at the Grand TEA Party. However many I talked to are worried that congress will ignore us. That may be helped by the minimal coverage by the media, even FOX concentrated on the Yale student's disappearance said my wife, who could not attend, and by the low media estimates of participants; 10s of thousands stated FOX, not 100's of thousand or millions as was more likely the case; 1.5 million from different police officers questioned.

      So what if congress ignores us? Well, we would not want to emulate Shay's Rebellion if at all possible. While it awakened the politicians of the time to the limitations of the Articles of Confederation, it cost 4 Patriots lives and many more wounded. I can imagine if the same sort of armed insurrection started how this Administration would react; an excuse for martial law and sedition acts as was done during President Wilson's Administration for just criticizing government. A reported 100,000 people were arrested, including the Socialists Parties presidential candidate, for their exercise of their freedom of speech.

      I worry that if our "march" on DC Saturday will not stop ObamaCare or even if the government option is dropped, the economic freedom issues (i.e. mandatory health care requirement under government mandates) and civil liberties (i.e. IRS held financial and doctors/hospital held medical records released to the government) will remain in some form. I don't trust the conference committee's outcome even if the Senate bill is milder in appearance.

      What is a better example is the Income Tax Revolt in Tennessee in 1999. Oh, you didn't hear about that revolt; neither had I since the MSM seems to have neglected to report much on this and it was before blogs were well known, so go to Intapundit's report at http://glennreynolds.com/?p=8 for some details. We should be prepared to follow that example set in Tennessee after the governor and legislature proposed to vote in a state income tax in 1999. The governor and legislature backed down and to this day TN is income tax free. As with MLK tactics, perseverance does win when you are right.

      With the reported 26,000 TEA Party organizations in our great country, we could make life difficult for those cloistered in DC.

    25. Martha, Florida says:

      Even with the possible forfeiture of their seats, the "I have the power" Democrats in congress and the executive branch will not be able to resist grabbing all they can, as quick as they can, in hopes that they can next assure themselves that they can toss the Constitution and stay in power for as long as they want. They've managed to do unbelievable grabs of our rights already. Obama did say once, like Clinton did, that he'd go for a third term and more if everyone wanted that (this was in his run for the presidency when the stupid media was loving him up and some others were reluctant to challenge his "saying nothing" speeches fearing they'd be called racist.) Well, guess he still thinks the rest of us out here, the regular citizens, are as stupid as he implies we are (on a regular basis, unfortunately.) A greater number of us all the time can not wait to oust the entire Washington elitist crew out on their collective tails, hopefully before they can do more permanent damage to our country. I hope also that we citizens have learned our lesson not to allow any governing entity to grab so much power over us in all aspects of our lives. Never again should so much power be concentrated or allowed in any one part of our government such as Obama has grabbed with his collection of czars. We had a system of balance of power before Obama and his cronies, fascists or marxist or communists or whatever they are, started their grabbing, with a Democrat majority in both houses to back him up; seems they still have not discovered that they're there now only to take the blame, but are becoming powerless, too, as they are being directed (dictated?) to pass whatever Obama's cronies hand them, written by unknown persons. Sounds just like a third world country's system in the making, doesn't it?

    26. Lee-White Tanks AZ says:

      The writer here is "right on the money" when he states that Fannie May and Freddie Mack should be shut down.

      What we have just seen, specifically as regards these two agencies" is a classic demonstration of what can happen when an "Organization" has long outlived its original purpose. One of "Saint" Peter Drucker's basic tenets was that "the primary objective of any organization is to survive"

      The "purpose" of the FMs was to provide a "backstop" for lending institutions making it easier for housing and certain other types of loans to be made. This was "stimulus" deemed necessary to "quicken" the change from a War economy to a Peace Time economy. A principle need was housing for the returning GIs as they entered the workplace and established families.

      When they (the FMs) virtually "created" the derivative market and the initial "instruments" this was way outside their "charter". The age old cautions about Idle minds and Idle hands truly apply in this instance.

      PC is Thought Control


      BTW I hope this gets published. I have again experienced the "green" guardian (moderated) and my comments don't appear without that warning. I did send an E-mail to your techies, I've had no response this time.

    27. Richard Cancemi, Arl says:

      Obama and all the Progressive, Liberal Democrats, not to mention the Communists among them, constitute an evil force whose goal is to destroy an take over our lives and America. Anyone who cannot "see" or "understand" this has to be blind and stupid.

      They hide behind the Flag and the Constitution and twist words around to promote their evil Marxist Flim-flam. They count on the ignorance and naivete of voters and on their followers' misplaced trust in Government.

      They are not to be respected as Americans and they should not be trusted!

      They all have to go!!! Especially their spokesman, Barak Hussein Obama.

      Americans need to rally and insist that Government divest itself of all Government intrusions into our lives.

      Washington, DC is corrupt. It is peopled by politicians who are like pigs with their snouts in the trough, slurping up all they can, to engorge their greed and insatiable wanting of power over others.

      We need to RE-CLAIM our Country!

    28. Bill San Antonio TX says:

      Have Senators Snowe and Collins of Maine finally come to their senses on what government run health care would mean? And, just maybe, we should REFORM what is broken?


    29. S.D.Isaacs says:

      If Obama succeeds America loses.

    30. Harry, Illinois says:

      Why is it when someone says anything contrary about Mr. Obama they are called (Yes, I will say the "R" word) Racist. He was elected by people of all colors in this country. Yet when it comes to our previous presidents and the policies that they enacted we never made any reference regarding race. Black/White/Brown, Yellow, Red they are all colors. What's the difference? We are all human beings. What difference does it make what color one is. It's the person making the policies, not the color that affects all of us. As humans, we should have gotten past this issue by now. Lets get off this racist thing. We are only insulting ourselves. I'm sick and tired of hearing the media use race as an issue.

    31. Pingback: Let’s Skip the Consumer Financial Protection Agency. Just Forget the Whole Thing. « American Elephants

    32. Virginia Rexburg, Id says:

      CORRUPTION IS THE PROBLEM! Honest leaders give us good government. Come on people. If they are corrupt, vote them out. If you vote them in because they do shady deals for you, shape up! Our republic needs an honest people.

    33. paul collins.the vil says:

      Ken in vegas feels that if obama fails,we fail.Really,if obama suceeds,then we fail.

      Here is a resent comment by him. "I will not accept a bill that will fail.When a bill is passed,I will own it". His job is to administer the law.He does not own it.With this additude regardless what the bill says he will do anything he wants.That to me means dictator.If obama suceeds,we won't even protest because it willbe against the law.He already controls finance,the auto industry,energy and if he gets health, he will have just about accompished his goal. IT IS ABOUT TOTAL CONTROL.WHY WEREN'T OBAMA AND CONGRESS IN D.C. THIS WEEKEND? BECAUSE THEY DON'T CARE WHAT WE THINK.

    34. electroniccigarettes says:

      First-rate Post.

      Thanks for the post.

    35. Lynn B. DeSpain says:

      According to the BBC their count was two million in the "Tea Party March in DC." I do know that in our State of Oregon Capital, Salem, there were hundreds, and no Press. I know that we are not a Sovereign State and after the 'Pledge of Allegiance' the US Flag was raised to the same height! It has always been to the same height!

      Most of us in Oregon are disgusted with both Parties. The Democrats because the majority are Liberal, and the Republican because they cannot seem to grasp the meaning of "Far Right" being the same as the "Far Left" in that both are zealots and will not compromise nor debate anything!

      Now the movement in our State is for an Initiative Process for this State to become Sovereign, and not be answerable to anything Federal but the Constitution and its Amendments! We are also using the Initiative Process for "Open Primaries" so that neither Party will do the selection of their Dunderheads, but that process will be left up to the State's Citizens.

      This we recommend to all other States, and this will take the power away from Obama and all the Obamacrats and the disease running rampant throughout Washington DC.


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