The plan was unveiled by Treasury Secretary Henry Paulson, former head of Goldman Sachs, two weeks after Bear Stearns fell. It would "consolidate" the state regulators (who work for the fifty states) and the SEC (which works for the U.S. government) under the Federal Reserve (which works for the banks). Paulson conceded that the result would not be to increase regulation but to actually take away authority from state regulators and the SEC. All regulation would be subsumed under the Federal Reserve, the bank-owned entity set up by J. Pierpont Morgan in 1913 specifically to preserve the banks' own interests
That the "Short-term Recommendations" chapter (teal-colored bands) of the "Blueprint for a Modernized Financial Regulatory Structure" are not temporary. In fact, they are provisions in federal legislation passed by the House last year. And that there will be no SEC investigations of equities or RMBS or CDO arbitrages -- not by Bush, not by his successor. The profits are taken.
Executive Summary | Introduction | History of the Current Regulatory Framework | Short-term recommendations
I would have posted this before but reformatting is just to much. Diversity is the key to economic and political evolution.
It seems to be a core operating principle of the current crop of leaders in Washington. Right alongside "Fight lots of land wars in Asia."
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
At that time, still, FDR had inherited "free" market structures from "merger mania" of fin de siècle industry monopolies, including domestic and "global" finance, dictated by corporatists such as Carnegie, Du Pont, Ford, or the more ambiguous Sam Insull and sanctioned by multiple, previous administrations. FDR inherited Paul Warburg, JP Morgan "gold bug," for example, to negotiate proto-Basel II monetary policy viz. European gold reserves. At the same time, the "populists" legacy --proto-agribiz represented in the House-- was agitating for silver-back currency and inflation, explicitly, to improve export marketing --rather than absorb deflationary price levels-- and so consolidate fragmented producer output. Ironically, Americans today, unfamiliar with the situation of yester year, recall little else of that administration besides WPA fiscal policy (Dorthea Lange) and cannot comprehend the individual actors battling personal gain through central, legislative control over financial and economic "self-governance." Eh, voilá, Greenspan. Or Icahn for that matter.
What has changed since 1904 is popular perception, cultural artifacts.
The 'subprime crisis' is incidental to a relentless, historical legislative agenda to assure the wealth and political hegemony of republicans as distinct from democratic agitators for distributive authority. That is all I have to say about N. Klein's "shock doctrine," and I haven't read it. I refer to monopolists (neocon.*) as federalists also because US political economy virtually guarantees the concentration of those resources, capital and coercion, through constitutionally authorized prerogatives granted Congress members, particularly senators.
What I realized, again, in review of financial and economic events preceding the New Deal administration is that there has never been a time, an era, when mercantile profit motivations have not decided so-called social justice, equal protection and living wages. Ultimately, the very concept of profit precludes a public trust and public goods, those "general utilities" like food, shelter, water, power, and yes labor. So long as private entities such as trade associations are permitted to dictate public goods, management conflict will plague econcomic "fairness." The concept of profit has no place assuring delivery of utiliies, not in any humanitarian world. Play, entertainment, that's different; games abound. Otherwise, no man serves two masters, especially if they're tempted by unearned income of $75,000 or more per month. Per month, university graduate.
Review the war/(implied) market failure timeline in the "history" section. US republican-oriented government exists to disguise its economic failures. Diversity is the key to economic and political evolution.
I refer to a text book to define "management conflict" for two reasons. First, corporatist are well aware that this task-oriented, ethical problem is an impediment to firm growth and sustainability; I would search my case study library except that I'm certain that level of detail is unnecessry. Second, I've discovered that there are virtually no "free" toobz references on the topic, but there are plenty of opinions about "conflict management" which is technique to minimize or neutralize "management conflict."
Surprising no one, theoretically, my reference text is Brearly, Meyers, and Marcus, "Fundamentals of Corporate Finance (1995).
"Management conflict" is definitively a condition, where fiduciary control and ownership of an asset are not one and the same. Presumably the self-interest of the "manager" is incommensurate to that of the "owner." At firm level, equity and option compensation is evince conflict of interest between one or more managers who exercise operational control over share valuation that may constitute arbitraged benefit, e.g. C-level "insider trading" and collusion. At a public policy level, managers who exercise operational control over multiple firms within an industry, i.e. trade association directors, that are awarded "self-regulation" are freed from "shareholder" and "stakeholder" penalties by virtue of public trust protection and practicable enforcement. In any case, if management and shareholder are agreed on share value growth, then return targets may easily exceed fundamental capacities or book value of the ongoing concern in order to obtain traded profit.
Brearly et al write under the heading "Ethics and management objectives".
We have suggested that managers should try to maximize market value. But some idealists say that managers should not be obliged to act in the self interest of their stockholders. Some realists argue that, regardless of what managers ought to do, they in fact look after themselves rather than shareholders. Let us respond to the idealists first. Does a focus on value mean that managers must act as greedy mercenaries riding roughshod over the weak and helpless? Most of the book is devoted to financial policies that increase firm value. None of these policies require gallops over the weak and helpless. In most instances there is little conflict betwee doing well (maximizing value) and doing good. [...] In part, the law deters managers from blatanly illegal action. But when the stakes are high, competition is intense, and a dealine is looming, it's easy to blunder, and not to inquire as deeply as they should about the legalit or morality of their actions. [1995: 19]
Let us respond to the idealists first. Does a focus on value mean that managers must act as greedy mercenaries riding roughshod over the weak and helpless? Most of the book is devoted to financial policies that increase firm value. None of these policies require gallops over the weak and helpless. In most instances there is little conflict betwee doing well (maximizing value) and doing good. [...] In part, the law deters managers from blatanly illegal action. But when the stakes are high, competition is intense, and a dealine is looming, it's easy to blunder, and not to inquire as deeply as they should about the legalit or morality of their actions. [1995: 19]
Under the heading "Corporate governance in the United States and elsewhere" Brearly et al write.
The separation between ownership and management in major United States corporations creates a potential conflict between shareholders (the principals who own the company) and managers (their agents who make the decisions). We noted in Chapter 2 several mechanisms that have evolved to mitigat this conflict: Shareholders elect a board of directors, which then appoints the managers, oversees them, and on occasion fires themManagers' remuneration is tied to their performancePoorly performing companies are taken over and the management is replace by a new team [...] For large corporations, separation of ownership and control is seen the world over. In the United States, control of large public[ly traded[ companies is exercised through the board of directors and pressure from the stock market. In other countries the stock market is less importan, and control shifts to major stockholders, typically banks and other companies.
Please, take what you will from this textbook description of corporate governance and conflict to explain the action of the FRB viz. Bear Stearns et al. and most certainly within the FRB's legal authority as both trade "self-regulator" and Treasury trustee and Treasury lender. Diversity is the key to economic and political evolution.
