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 4/10 Good --- dealscape.thedealblogs.com http://www.thedeal.com/dealscape/atom.xml
Wednesday, July 09, 2008 --- 43 days ago http://www.thedeal.com/dealscape/2008/07/the_fed_and_treasury_is_the_ho.php
 Now things are getting interesting. The Wall Street Journal digs into the Ben Bernanke speech Tuesday and reveals -- shocking -- tensions inside the Beltway. This is actually news. The Federal Reserve and the Treasury had appeared to be marching in eerie lockstep on the central bank's intervention in investment banking, through its Wall Street lending program, and the conventional wisdom, buttressed by a series of Treasury papers, that the Fed would take on the role of "market stabilizer," otherwise known as a super-regulator. Now the Journal reveals the merest whisper, off the record of course, of dissent to the logical unfolding of that plan, which is to give the Fed oversight (or regulatory) powers to accompany its lending program. It now seems that some folks at Treasury fear a concentration of power and that the Fed might move to bail out a firm "even if failure is the most appropriate option." This is fascinating, because the use of the term "appropriate" suggests a political, rather than technical, decision. This was always going to be the unstable footing beneath the Fed as the super-regulator. Not only could broad supervisory powers in theory conflict with its primary (even primal) role as monetary cop, but the basis of the Fed's vaunted independence was always the useful fiction that it was engaged in technical financial, not political, operations. The additional fact that this would consign the Securities and Exchange C ... |
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