Las Vegas real estate, mortgage, appraisal blog

A recent New York Times article talked about how the Treasury Department is proposing that there should be more oversight in the financial market. The first paragraph gives a graphic mental image of what is assumed will happen.

The Treasury Department will propose on Monday that Congress give the Federal Reserve broad new authority to oversee financial market stability, in effect allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system.

Somehow people are not realizing that this is a classic example of laws being passed that are simply to make people feel safe. Further in the article the truth about this proposition was made clear.

While the plan could expose Wall Street investment banks and hedge funds to greater scrutiny, it carefully avoids a call for tighter regulation.

The plan would not rein in practices that have been linked to the housing and mortgage crisis, like packaging risky subprime mortgages into securities carrying the highest ratings.

The plan would give the Fed some authority over Wall Street firms, but only when an investment bank’s practices threatened the entire financial system.

And the plan does not recommend tighter rules over the vast and largely unregulated markets for risk sharing and hedging, like credit default swaps, which are supposed to insure lenders against loss but became a speculative instrument themselves and gave many institutions a false sense of security.

The most interesting part is the quote "only when an investment bank's practices threatened the entire financial system."

If these same lawmakers and regulators knew when that was...someone would have stepped up sooner. Who really has the insight to decide when the "entire system" is actually at risk and not just one bank?