Obama's new plan: to shift responsibility

Although the details have not been released as of the time of this post, here's an article on President Obama's new plan to address the financial "irregularities" that exist in the United States system: http://www.msnbc.msn.com/id/31403945/ns/business-stocks_and_economy.

There are two main problems to this plan: (1) expanding the power of the Federal Reserve; and (2) enacting a new agency divests the American people of the power to enact strong rules.

It needs to be said: the reason why we are where we are is due to the inordinate amount of influence that the Federal Reserve system has on the lending industry and on the federal government. The Fed is not an agency, and it is not quite private. It is, in the words of Wikipedia, an "independent government institution with private elements". It has its own Board of Governors, largely made up of the most powerful bankers in the country, but it has the power to set regulations and laws that affect the entire lending industry with the muscle of the federal government. Despite the fact that Congress technically has power over the institution, the Federal Reserve is one of those unique government bodies that lacks the accountability of elected officials (because the governors are appointed), yet can wield the sort of power that can cripple the entire country. They are like the Supreme Court, without the robes (and without lifetime terms).

Greenspan believed in the using monetary policy to keep the economy growing. And then, he recanted. Volcker enacted policies that drove inflation down, but also crippled the American economy for a couple of years. An entity such as the Federal Reserve does not need more power: it needs less power. Further, since the governors are bankers, do we really want the people who drove the Titanic into an iceberg to plot the course home?

Setting up another government agency expands on government unnecessarily. There are plenty of government agencies that can oversee the lending industry that already exist: the Department of Commerce, the Federal Trade Commission, the Department of the Treasury, etc. What the proposals fail to address are the gaps in the federal statutes that permit the sort of exploitation that led to the financial crisis. Further, I am concerned that vesting in an agency the sort of authority normally reserved for Congress -- in this case, the setting of reasonable regulations to govern the creation of lending instruments -- usurps the traditional role of the people to determine what is acceptable law. Agencies are headed by appointees, which are subject to the vagaries of politics, something which statutes usually stand up to.

Color me disappointed.