Obama Administration Promises Tougher Bank Oversight
January 24, 2009 (LPAC)-- The White House is signaling that the big banks will have to face something they didn't face under the recently departed Bush/Cheney regime: Oversight of how they spend U.S. taxpayer-supplied money. Prior to meeting with Congressional leaders yesterday morning, President Obama noted "the lack of accountability and transparency in how we are managing some of these programs to stabilize the financial system." White House Press Secretary Robert Gibbs later told reporters that Obama has directed his advisors to come up with new restrictions on the second half of the $700 billion rescue plan. "The American people need to be greatly assured that their hard-earned money is not going to the bonuses or the remodeling of an office at a bank that's in trouble," he said, referring to news reports that former Merrill Lynch chief John Thain spent $1.2 million to remodel his Manhattan office, including $1,400 on a wastepaper basket.
Bloomberg reports that Obama aides are saying that banks that get additional aid won't be allowed to acquire other banks and will be pressed to provide more credit to consumers and businesses. Larry Summers, the head of Obama's National Economic Council, also reported to Congress, last week, that up to $100 billion of the remaining funds will be used for foreclosure relief and he promised that the administration will restrict executive pay and dividends for institutions that get the money.
The Obama Administration also plans to move quickly in restoring some forms of financial regulation, reports an article for publication the Sunday edition of the New York Times. Some of the proposals that the administration is preparing draw from the report of a committee led by former Federal Reserve Chairman Paul Volcker. The theme of that report, according to the Times, is that many major companies and financial instruments have been mostly unsupervised and need to be pulled back under a larger regulatory umbrella. Some of the measures include eliminating conflicts of interest at credit rating agencies, issuing Federal standards for mortgage brokers and requiring derivatives like credit default swaps to be traded through a central clearinghouse or on one or more exchanges, making them much easier to regulate. Under the proposals, hedge funds would also be required to register with and be more closely supervised by the SEC.
According to the Times, "Officials said that the proposals were aimed at the core regulatory problems and gaps that have been highlighted by the market crisis," including lax government oversight of financial institutions, the creation of exotic financial instruments and so on. While discussion of the regulation of derivatives and hedge funds is undoubtedly useful, it is not enough without the bankruptcy reorganization of the system, as only Lyndon LaRouche is proposing.
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