Geithner's New Regulatory Regime

The government now thinks that swaps and other derivatives (boo-hiss!) are securities after all. Too bad that distinction comes about ten years too late.

Treasury Secretary Timothy Geithner (previously referred to here as "The Great Gazoo") said yesterday that the government's proposal is intended to create more transparency because "this financial crisis was caused in large part by significant gaps in the oversight of the markets."

How will the government save financial humanity in the future? By hitting control-alt-delete and repealing major parts of the December 2000 Commodity Futures Modernization Act. That law passed with bipartisan support. Oh sure, it was attached as a rider to an 11,000-page appropriations bill, but I guess that's the way stuff happens in D.C. Ultimately, President Clinton signed off on the law that essentially deregulated a number of financial instruments that helped accelerate our current financial crisis.

That hands-off approach didn't work too well, a fact that is painfully clear in retrospect. So now the government will make companies trade these products on exchanges and the firms that use them will be forced to disclose all sorts of details about them. Again, better late than....

In a separate effort, Geithner wants to totally overhaul the regulation of the entire financial system. It really is amazing to see current regulators throw their former colleagues under the bus, even though they were all in on it.

I think smart regulation is a great thing, but considering that regulators still don't require brokers in this country to put their clients' interests before their own or his company -- the "fiduciary standard" -- you'll excuse me if I seem a little jaded on the topic.