Another Financial Risk Regulator?

Some in the administration and Congress have suggested that the Federal Reserve act as a so-called systemic risk regulator. That would allow the Fed to provide implicit government guarantees. It would probably also involve labeling institutions as "too big to fail."

But this may increase chances they will fail, and that the taxpayer will then wind up paying the bill.

I repeat what I have said countless times: The Fed’s prime purpose Is to maintain the value of the currency, not to focus its attention elsewhere, as the current administration and Congress desires.

Another suggestion coming from politicos is to have a systemic risk adviser in the form of an independent government agency. It would have no regulatory authority, but would provide a so-called “expert” panel and the ability to speak to and make suggestions to Congress and the administration. Something like the National Transportation Safety Board.

I see a major problem with any agency with regard to such risk. Because nothing will be done by Congress when it gets suggestions of this kind. The way nothing was done by key Congressmen about Fannie Mae, Freddie Mac and their congressional overseers, when those entities were signaling severe difficulties, leading to the current financial debacle.

This lack of authority is a major defect. An agency that could not order things done would accomplish nothing.

Remember the “lets roll the dice” retort, as one of our noted politicos famously said, when warned about looming financial disaster with Fannie Mae and Freddie Mac?