What the Fed HA$ Delivered On:

. . . its intent – clear, for those who would see, in Oct., 2008 – that TARP funds would be used to bail out not only Goldman, but foreign investors et al.

Results of the recent Fed audit showing that trillions went to foreign investors discussed here. Oct., 2008 c-Blog post warning that the TARP bill was designed to permit this here.

Speaking of Obama's Choices,

For much of 2005, an embattled Democratic Party fought Pres. G.W. Bush's initiative to privatize Social Security. The plan was defeated, but (Halloween surprise!) the brains behind Bush's initiative are being implanted in the Obama admin. – by Obama, who's nominated Chuck Blahouse to one of two public trustee slots on the Social Security Board.

Blahous was a deputy director of the Bush National Economic Council and executive director of Bush’s Commission to Strengthen Social Security. That commission was tasked to draft the policy recommendations for maintaining Social Security solvency, in part through partial privatization.

More at The Wall Street Journal; more on Obama's personnel picks here.

UPDATE: Speaking of changealiciousness, Obama has given Shell a conditional green light to drill for oil and gas "in the environmentally sensitive Beaufort Sea." "Rebecca Noblin, an Alaskan specialist with the conservation group the Centre for Biological Diversity, said: 'We're disappointed to see the Obama administration taking decisions that will threaten the Arctic. It might as well have been the Bush administration.'" Details at the UK Guardian.

Obama's Disappointing Appointments per Naomi Klein et Al.

Very rough transcript of video of Klein here, which is unfortunately interrupted by an odd interlude of pop-tuneship (emphasis supplied):

" . . . we're seeing these very disappointing appointments partly because we have not been honest about the Clinton years . . . it was a nice message to present the 90's as these "wonder years" in contrast to the Bush years; and that created a situation in which you could have a Larry Summers presented as a wise man instead of going down with Alan Greenspan -- Rubin and Summers should have gone down alongside him. It was an election strategy that relied on intellectual dishonesty. Now, Obama has already won, so there's no reason to be pandering in this way. Now, there's going to be a stimulus package, but how is it going to be paid for. Obama promised to increase taxes on the wealthy; Emmanuel has hinted they might not do that. And there's a huge fight over the kinds of taxes paid by hedge funds; and Larry Summers is coming straight from managing a hedge fund, one of the most secretive hedge funds around. The real question is not will they spend taxpayer money on infrastructure; they will. But will they rack up huge deficits, or will they actually pay for this with taxes on the wealthy, which is what they promised to do; because if they don't pay for this in an equitable, progressive way, there will be a huge economic crisis down the road, it will be blamed on Obama, and then there will be a wave of privatizations of these new investments in public spending, and there will be a whole new bubble."

Klein is i.m.h.o. a very smart person.

I've been keeping notes on Obama's appointments, and they're not totally reassuring. In particular, on the economic front, despite what corporate media types say, there were plenty of people who did see our current crisis coming. Not one of them has been given any responsibility for pulling us out of it; instead, we're entrusted entirely to those who helped engineer it.

I don't have time to edit the following info properly but I don't want to hold it back any longer, so here it is; sorry it's a bit raw:

Some Got It Right:

http://online.wsj.com/article/SB123086035502948067.html : For years, they were the party poopers: financial prognosticators who, amid the ebullient stock prices and effervescent home values that defined the early 21st century, warned of trouble. In hindsight, they're the ones who got it right -- or, at least, some of it.

Often mocked for predictions that seemed outlandish at the time -- big banks will fail, Fannie Mae will go bankrupt -- a few of these outliers, including money manager Jeremy Grantham, mutual-fund manager Bob Rodriguez and brokerage-house owner Peter Schiff, were among the first to describe key parts of the U.S. financial meltdown.
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http://www.ritholtz.com/blog/2009/01/no-one-saw-it-coming-really/ : Mr. Rajan Was Unpopular (But Prescient) at Greenspan Party [http://online.wsj.com/article/SB123086154114948151.html ]:

“It was August 2005, at an annual gathering of high-powered economists at Jackson Hole, Wyo. — and that year they were honoring Alan Greenspan. Mr. Greenspan, a giant of 20th-century economic policy, was about to retire as Federal Reserve chairman after presiding over a historic period of economic growth.

Mr. [Raghuram G.] Rajan, a professor at the University of Chicago’s Booth Graduate School of Business, chose that moment to deliver a paper called “Has Financial Development Made the World Riskier?” [http://www.kc.frb.org/publicat/sympos/2005/PDF/Rajan2005.pdf ]

His answer: Yes.

Mr. Rajan quickly came under attack as an antimarket Luddite, wistful for old days of regulation. Today, however, few are dismissing his ideas. The financial crisis has savaged the reputation of Mr. Greenspan and others now seen as having turned a blind eye toward excessive risk-taking.”
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From http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom?print=true# : Michael Lewis, Meredith Whitney, Steve Eisman, Vincent Daniel, Danny Moses, Ivy Zelman, Jim Grant, Dan Gertner
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http://clusterstock.alleyinsider.com/2009/1/economists-who-blew-it-agree-prosperity-is-just-around-corner
Henry Blodget

Now that we're mired in the worst economic crisis since the Depression, forecasters who didn't see it coming are consoling themselves by saying, "no one saw it coming." This is hogwash. Many people saw it coming: Gary Shilling, Nouriel Roubini, Jeremy Grantham, Dean Baker, Peter Schiff, Robert Shiller, et al. They just don't happen to work for major investment banks.

It is true that the folks who work for major investment banks didn't see it coming. Historians will eventually determine whether this is because the major investment banks uniformly employ boneheads, or, more likely, because, when you work for an investment bank, it is easier to conclude that now is always a good time to buy stocks.

(None of these people have been given any responsibility in Obama's admin.)

And Some Didn't:

See Naomi Klein at http://www.youtube.com/watch?v=GDvRfkfMpp8&eurl=http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=385x265682
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http://www.nytimes.com/2009/01/10/business/10rubin.html?_r=1&hp :

Robert E. Rubin, the former Treasury secretary who is an influential director and senior adviser at Citigroup, will step down after coming under fire for his role in the bank’s current troubles, the bank confirmed Friday.

Since joining Citigroup in 1999 as an adviser to the bank’s senior executives, Mr. Rubin, 70, who is an economic adviser on the transition team of President-elect Barack Obama, has sat atop a bank that has made one misstep after another.

When he was Treasury secretary during the Clinton administration, Mr. Rubin helped loosen Depression-era banking regulations that made the creation of Citigroup possible. During the same period he helped beat back tighter oversight of exotic financial products, a development he had previously said he was helpless to prevent . . . .
____________

WSJ Says That Crash Promulgator Plays Central Role in Planning Obama Economic Policy

http://www.prospect.org/csnc/blogs/beat_the_press

The Wall Street Journal told readers that former Treasury secretary and Citigroup honcho Robert Rubin is playing a central role in designing President Obama's economic policy. It would have been appropriate to note that with the possible exception of Alan Greenspan, Mr. Rubin is the person most responsible for the policies that lead to the current crisis.

Mr. Rubin was a staunch advocate the policy of one-sided financial deregulation under which the government ignored prudential regulation while continuing to allow major banks to benefit from the government's "too big to fail" insurance policy. Mr Rubin also actively promoted an over-valued dollar which led to the enormous trade deficit of recent years. In addition, he had a "bubbles are fine" approach that allowed huge asset bubbles to grow unchecked.

The WSJ does note that Mr. Rubin personally profited from these policies in his role as a top Citigroup executive, but it does not point out the extent to which he was directly responsible for the policies that have produced the worst economic downturn since the Great Depression. If Mr. Rubin is in fact playing a large role in determining the economic policies of the Obama administration, this should be serious cause for public concern.
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http://theautomaticearth.blogspot.com/2009/01/january-10-2009-hornswoggled.html :

Ilargi: . . . . Lawrence Summers and Robert Rubin are the finance powerhouses in the upcoming Obama administration. They were in the exact same place 10 years ago. This time, they bring along a protégé in Tim Geithner, who will be the fall guy if all goes wrong. And they know it will go wrong; they've seen it before. They're not dumb. They're just sick, not stupid. They know it will go wrong, because everything they've done so far has failed. Only, that's not what they see. They can't see it, because they are gambling addicts. And as you can find out in Gambling Anonymous meetings, the addicts are masters in distorting their own perception of reality. Rubin and Summers differ from most addicts in that they are in positions to control what is legal, which is quite close to what is real, and what is not.

The November 12, 1999 repeal of the Glass-Steagall Act (officially named the Banking Act of 1933), enforced through the signing into law of the Gramm-Leach-Bliley Act by Slick Billy Clinton, gave them access to depositors’ money, and thus made it legal to use people's savings for "investments". 9 years later, those savings were all gone. Today they have an even larger pool of dough: the money of all Americans, and all of their children. This is what you're looking at when you see Henry Paulson, Barney Frank, Ben Bernanke or Barack Obama talk about bail-outs and rescue plans. It's all about providing the world's most megalomaniac gamblers with cash for their addictions. There's nothing else, that’s all there is.

The banking industry had tried to get rid of Glass-Steagall for a decade, but, aside from minor changes in 1980 and 1982, it wouldn't be until Rubin and Summers were at the helm, as Treasury Secretary and Deputy Secretary, that they succeeded in pushing through the repeal. After setting up the procedure, Rubin left the government on July 1, 1999, and joined the newly formed Citigroup, leaving Summers as Treasury Secretary to execute the plan and have President Clinton sign the Gramm-Leach-Bliley Act into law.

Citigroup was put together in 1998 by combining Citibank and insurance slash finance company Travelers. The only way this combination made sense was for the Glass-Steagall Act to be gone, since the Act barred banks merging with insurers. Citi would have had to shed many valuable assets within the next 2-5 years to remain within the law. But then-CEO Sandy Weill stated at the time: "that over that time the legislation will change...we have had enough discussions to believe this will not be a problem“. In other words, the fix was in. The fact that Rubin joined the company months before Clinton signed Gramm-Leach-Bliley only serves to confirm that.

* * * * *
Of course the Fed chairman during all this time was Alan Greenspan. In 2000, the trio of Rubin, Summers and Greenspan successfully argued for the deregulation of the derivatives trade. This enabled Citi and Goldman Sachs, as well as other major Wall Street players, to increase their bets and gambles manyfold. And let me repeat: it took just 9 years for them to burn through all customer deposits. And then some.

[More at link above.]
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The nomination of Admiral Dennis Blair for Director of National Intelligence cannot be permitted to pass under any circumstances.

As reported by Democracy Now, when genocidal monsters in the Indonesian military were committing massacres in East Timor, Admiral Blair DEFIED his orders to get them to stop, and instead gave them encouragement to continue. He then lied to Congress about it all. No such loose cannon with such blood on his hands can be allowed in the new administration. The links to both these video stories can be found on the Reject Blair Action Page below:

Reject Blair Action Page: http://www.usalone.com/reject_blair.php
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http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x417019
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Re- Dennis Ross, to be retained under the Obama admin.:

"In 2006, Ross joined a cast of neoconservatives and foreign policy hawks in supporting the I. Lewis Libby Defense Fund, an initiative aimed at raising money for the disgraced former assistant to Vice President Dick Cheney who was convicted in connection to the investigation into the leaking of CIA agent Valerie Plame’s name. Ross served on the group’s steering committee along with Fred Thompson, Jack Kemp, Steve Forbes, Bernard Lewis, and Francis Fukuyama.24 The group’s chairman was Mel Sembler, a real estate magnate who serves as a trustee at AEI and has funded the group Freedom’s Watch."

"After the 9/11 terrorist attacks, Ross supported the advocacy work of PNAC, a neoconservative-led letterhead group that advocated overthrowing Saddam Hussein in response to the attacks, even if he was not tied to the them.26 Ross signed two PNAC open letters on the situation in post-war Iraq, both published in March 2003. The first of these, “Statement on Post-War Iraq,” was issued on March 19, 2003, the day before the United States began its invasion. The letter argued that Iraq should be seen as the first step in a larger reshaping of the region’s political landscape, contending that the invasion and rebuilding of Iraq could “contribute decisively to the democratization of the wider Middle East.” Other signatories included Max Boot, Eliot Cohen, Thomas Donnelly, Joshua Muravchik, and several other core neoconservatives."

(The above quotes are from Right Web's Profile of Dennis Ross.
http://www.rightweb.irc-online.org/profile/4786.html )
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The Trouble with Sanjay Gupta
By Paul Krugman / The New York Times

So apparently Obama plans to appoint CNN’s Sanjay Gupta as Surgeon General. I don’t have a problem with Gupta’s qualifications. But I do remember his mugging of Michael Moore over Sicko. You don’t have to like Moore or his film; but Gupta specifically claimed that Moore “fudged his facts”, when the truth was that on every one of the allegedly fudged facts, Moore was actually right and CNN was wrong.

What bothered me about the incident was that it was what Digby would call Village behavior: Moore is an outsider, he’s uncouth, so he gets smeared as unreliable even though he actually got it right. It’s sort of a minor-league version of the way people who pointed out in real time that Bush was misleading us into war are to this day considered less “serious” than people who waited until it was fashionable to reach that conclusion. And appointing Gupta now, although it’s a small thing, is just another example of the lack of accountability that always seems to be the rule when you get things wrong in a socially acceptable way.

Link: http://www.michaelmoore.com/words/mikeinthenews/index.php?id=12995
NY Times link: http://krugman.blogs.nytimes.com/2009/01/06/the-trouble-with-sanjay-gupta/
MORE at http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4779242

Just sayin' . . . .

UPDATE: Per USAToday,

This morning's reports about Health and Human Services secretary-designate Tom Daschle, his tax troubles and the money he earned in recent years from interests in the health care industry that he would oversee, include:

• A New York Times report that Daschle, "was aware as early as last June that he might have to pay back taxes for the use of a car and driver provided by a private equity firm, but did not inform the Obama transition team until weeks after Mr. Obama named him to the health secretary's post."

• Word in The Washington Post that financial disclosure forms show that "Daschle's expertise and insights, gleaned over 26 years in Congress, earned him more than $5 million over the past two years, including $220,000 from the health-care industry, and perks such as a chauffeured Cadillac, according to the documents." The Times comes up with a larger figure. Daschle earned "more than $300,000 in income from health-related companies that he might regulate as secretary," it says.

The NYT notes,

As a politician, Mr. Daschle often struck a populist note, but his financial disclosure report shows that in the last two years, he received $2.1 million from a law firm, Alston & Bird; $2 million in consulting fees from a private equity firm run by a major Democratic fundraiser, Leo Hindery Jr. (which provided him with the car and driver); and at least $220,000 for speeches to health care, pharmaceutical and insurance companies. He also received nearly $100,000 from health-related companies affected by federal regulation.

Also, according to Common Dreams (citing WaPo), Daschle was among the Dems who voted for the bankruptcy reform bill, which made it much for difficult for consumers to actually discharge their debt, after receiving $45,000 in political contributions from CitiGroup during the previous six years. "I've never seen a bill that was so one-sided. The cries, claims and concerns of vulnerable Americans who have suffered a financial emergency have been drowned out by the political might of the credit card industry," said former Dem. Senator Howard M. Metzenbaum now head of Consumer Federation of America. A similar bill had been vetoed by President Clinton.

Further UPDATE: Per Juan Cole,

Meanwhile, it is rumored that among the main shapers of Obama's Iran policy will be Dennis Ross, the head of the Washington Institute for Near East Policy, the think tank of the American Israel Public Affairs Committee. During Ross's tenure there, the WINEP website carried a call to bomb Iran; a paper arguing that nothing bad would happen if the US did bomb Iran; and it listed as a WINEP associate Daniel Pipes, who spent most of his waking hours during the past year decrying Barack Obama as a stealth Muslim and an apostate (which was it?) and who has repeatedly said racist things about Muslims. Turning Iran policy over to the Israel lobbies, the major agitators for a US war on Iran, is a very bad idea . . . .

Further UPDATE: Via boingboing,

Snip from a post by Alan Wexelblat on the alarming number of copyright maximalist lawyers being appointed by the Obama administration to the Department of Justice. Bad news for people who believe in copyright reform, and greater freedom to share, remix, and reuse content online. Snip:

First off, there's the #3 man at Justice, Thomas Perrelli, accurately described by CNET as "beloved by the RIAA". Not only has this guy been on the wrong side in the courtroom, he's fingered as instrumental in convincing the Copyright Board to strangle Web radio in its crib by imposing impossible fee structures.

* * * * *

Then there's the #2 man, currently slated to be David Ogden. If that name only rings a faint bell it's because you have to cast your mind back to Eldred v Ashcroft, the argument on whether retroactive copyright term extensions were legal. Sitting over there on Ashcroft's side? That's Mr. Odgen. For extra-bonus ick points, Ogden also was involved in defending the heinous COPA legislation, fortunately now dead and buried (but not forgotten).

The capper on this line-up of suspicious characters is Donald Verrilli, now up for Associate Deputy Attorney General. This specimen of legal acumen is front and center in the Cartel's jihad, having appeared for Viacom when it sued YouTube, for the RIAA against Jammie Thomas, single mother. And if we peer back a little farther, we find Verrilli's dirty fingerprints on MGM v Grokster.

Optimist: "The age of Reaganism is over,"

Per Jeffrey Sachs, special adviser to U.N. Secretary-General Ban Ki-moon and director of the Earth Institute at New York's Columbia University, as reported by Reuters. "'The no-regulation, low-taxes (philosophy) has broken the back of our economy. We now have to get serious about reconstructing normal government that pays its way and a normal financial sector that's properly regulated.'"

I hope to h*ll he's right; but there are a lot of obstacles.

A Few Key Concerns Re- the Bailout Bill

This is a very rough draft, but I thought impt. to get it out.

We may well be at a make-or-break moment like few our country has faced before. So pls try to digest this sufficiently to pick out a few points you can relate to and call your congresscritters NOW.

Under the Bailout Bill, Paulson's Authority to Buy Bad Debt on Behalf of Taxpayers Is NOT Limited to U.S. Firms, or Even to Debt Secured by U.S. Properties

As stated by Rep. Brad Sherman (CA) on CNBC (video here):

"The Bank of Shanghai can transfer all of its toxic assets to the Bank of Shanghai of Los Angeles which can then sell them the next day to the Treasury. I had a provision to say if it wasn't owned by an American entity even a subsidiary, but at least an entity in the US, the Treasury can't buy it. It was rejected.

"The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can't be sold to the Treasury.

"Hundreds of billions of dollars are going to bail out foreign investors. They know it, they demanded it, and the bill has been carefully written to make sure that can happen."

See also this.

"It's the Derivatives, Stupid"

Much discussion I've heard talks about this bill as if it enables Paulson merely to buy mortgages, or interests in mortgage pools, and suggests that even if the loans are bad, they're only partially under-secured, so there's no way we'll lose more than a portion of our money and we might even come out ahead if we buy these assets at bargain prices.

This is a red herring.

Paulson is NOT limited to buying mortgages and interests in mortgage pools. Bad mortgages are only a small part of what he can buy, and they are only a small part of the problem -- only 5%, according to the gov't's own, recent report; derivatives are 95%.

These derivatives are basically shallowly secured bets. So, the much larger problem is the layers of leveraging on top of mortgage pools. See here:

“I think the $700 billion will be like a drop in the bucket because the total credit market in the U.S. is something close to $60 trillion. Then you have the CDS market – credit default swaps – of around $62 trillion. Then you have the whole derivatives worldwide worth about a notional $1,300 trillion. So the $700 billion is really nothing and the Treasury is just giving out this figure when actually the end figure may be $5 trillion. . . the problem is not that home prices have gone down; the problem is excessive leverage.”

I guess this is why the serious analysts I've read worry that this bill will do no more than delay our day of reckoning.

Why No Serious Discussion of Alternatives?

Such as:

1. The "Trickle Up" plan.

2. The progressive Dem plan described here.

3. Bill Clinton mentioned during his most recent appearance on The Daily Show that when faced with a similar situation, instead of buying bad assets outright, which sticks taxpayers with 100% of the risk, in a similar sitch under the Clinton Admin. we made LOANS which bore INTEREST. Note that under general legal principals, the first people to get paid off are lenders. Next, investors. Last, owners. So this approach would incentivize the people we're giving the money to get their houses in order and give significantly better assurance to taxpayers that both their original investment and possibly even some kind of profit will be recovered.

4. George Soros thinks we should buy equity, not bad assets. As suggested above, this approach would afford taxpayers more upside for less risk.

5. See also here.

6. And here ("In a Sept. 24 letter to congressional leaders, 166 academic economists [including three Nobel Prize winners] said they oppose Treasury Secretary Henry Paulson's plan because it's a "subsidy'' for business, it's ambiguous and it may have adverse market consequences in the long term. They also expressed alarm at the haste of lawmakers and the Bush administration to pass legislation.")

The Secret Pink Elephant

The Fed has been massively inflating the dollar as our only way out of this mess. Citizen wealth won't be eviscerated JUST by busted home values, or by hits to our savings though portfolio losses, or even by the bailout. We'll suffer as much or more through losses to our buying power.

(I saw this coming when we invaded Iraq while cutting taxes. There simply was no other realistic way to pay for it all.)

Elimination of the Mark-to-Market Rule

See here. Elimination of this rule means that the values claimed by companies for their assets need no longer have any basis in reality. Even assuming the new rule requires companies to estimate values reasonably and in good faith, proving that management understated values unreasonably or in bad faith will be all but impossible, since everyone agrees it's impossible to determine the values for assets for which there's no market (assuming you dismiss the notion that no market means the value is zero), and no one knows just how bad these debts are.

There will no longer be any meaningful basis for investors to evaluate companies' assets. Investors who understand the change won't want to invest in U.S. firms, and investors who don't understand it will basically be defrauded.

Elimination of the Up-Tick Rule

See this and sources cited therein.

Obviously, we need MORE, not less oversight, regulation, and meaningful DISincentives for bad behavior

. . . but this bill does NOTHING to bring those about; in fact if anything, it continues the trend initiated during the Reagan administration toward dismantling such protections. The Glass-Steagall Act should be restored, as well as the up-tick rule and other protections.

The Secret Hot Pink Elephant

All financial institutions would prefer a free-for-all; but perhaps now we have the chance not only to re-regulate our own markets but to persuade other countries to regulate theirs, too. This would not only ensure a level playing field for our own markets and institutions, but promote fairness to investors, large and small, world-wide.

Who Will Administer the Assets We Buy?

We'll be buying the worst of what "professionals" have stuck themselves with, but we won't have the stronger assets to help us carry any losses and we don't now have the professional expertise to deal with what we'll be buying.

People talk about this as a "liquidity crisis"; but there would be no liquidity crisis if those who created it weren't seriously worried that what underlies it is a bunch of big losses. These "assets" will require active management.

And does anyone really imagine the government as run by the current administration is going to deal with these assets more efficiently than incentivized professionals? Not really. As The New York Times reported ten days ago,

"Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.

"Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.

"At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees."

But aren't those the same people who drove the system off a cliff and couldn't fix it on their own dime?

Did You Know . . .

That Treasury Secretary Henry Paulson was Chairman of Goldman Sachs during the period for which it was investigated for fraudulent activity by Elliott Spitzer? (See Wikipedia on Paulson and Spitzer.)

UPDATE: Hm, looks like as of 10-15-08, the Wikipedia info on Paulson has been edited . . . no longer any mention of investigation of Spitzer's investigation of wrongdoing under Paulson's management of Goldman Sachs; instead, it says, "Paulson led government efforts to avoid a severe economic slowdown."

Proposed Market Regulatory Reform Irrelevant & Dangerous

If you're wondering how Treasury Sec. Henry Paulson came out so quickly with detailed proposals for a complete consolidation and overhaul of the five gummint agencies now responsible for oversight of various sectors of our financial system, you haven't done the homework I assigned -- watching the Naomi Klein interview embedded in my earlier posts and (here and here).

Senator Chris Dodd (D) might be wondering, too -- he's Chairman of the Senate Banking Committee, and no one consulted him about the proposals.

Reuters reports, Dodd "said he welcomed the plan offered by . . . Paulson, but questioned its relevance in addressing falling home prices, rising foreclosures and the imminent threat of recession. . . . [Overhauling the regulatory system] 'doesn't relate to the issues we're grappling with,' Dodd said on a conference call. 'The failure of the administration to utilize the tools they've been given over the years . . . . That's the problem, not reorganization.'

" . . . Paulson on Monday issued a sweeping plan that calls for giving the Federal Reserve more authority over Wall Street . . . . Although the plan has been under development for many months, Dodd said he had not been asked for input on it. Noting that some of the ideas in the Paulson plan have been under discussion for years, Dodd said reorganizing the government was not the problem." More here.

I.e., in my view, the problem is not that the Federal Reserve needs more power, but that we've eviscerated the protections put in place after the market crash of 1929: the enforcement capabilities of bank regulators and the SEC, S&L regulation, and the Glass-Steagall Act.

The Wall Street Journal reports, "'It reads like amateur hour and it's because none of those guys ever worked in a regulated, chartered bank,' said Camden Fine, president and chief executive of the Independent Community Bankers of America . . . . 'A bunch of guys from Wall Street decided this was going to be their proposal.' . . . Large financial-services companies have had a seat at the table as Treasury crafted its plan . . . . " More here.

Others reviewing the details of the plan are even more concerned. Mike Whitney writes that, though the proposals are being billed "as a 'massive shakeup of US financial market regulation,' . . . [we should not] be deceived. [They] are neither 'timely' nor 'thoughtful' . . . . In fact, it's all just more of the same free market 'we can police ourselves' mumbo-jumbo that got us into this mess in the first place. The real objective of Paulson's so-called reforms is to decapitate the SEC and increase the powers of the Federal Reserve. . . . "

"If Paulson's plan is approved in its present form, Congress will have even less control over the financial system than it does now, and the same group of self-serving banking mandarins who created the biggest equity bubble in history will be able to administer the markets however they choose without the annoyance of government supervision. That's exactly what Treasury Secretary and his pals at the Fed want; unlimited power with no accountability." More here; see also The New York Times.