March 25, 2009
The Unregulated Bailing out the Regulated
Michael Barone has a great column today in US News and World Report. He notes a little flaw in the current narrative of the need for more regulation. "[Geithner] is asking the most unregulated parts of the financial system—hedge funds, private equity firms—to bail out the most regulated part of the financial system—the banks."
Democrats like Barack Obama and Barney Frank, at least on the campaign trail or in sound bites, have portrayed the financial crisis as the product of deregulation. The solution, they say, is more regulation. In that vein Frank, one of the brainiest members of Congress, is proposing that the Federal Reserve become a regulator of systemic risk, with the power to regulate firms that because of their size or strategic position are of systemic importance.
As always for Barone, great stuff, plenty germane the day after the President told us the problem with AIG was that the governmnet didn't have enough authority.
Hat-tip: Instapundit