Who Are These Guys?

We have been spurred back into writing. There is too much going on not to comment. It is amazing with the ease that politicians are granting the Federal Reserve to accomplish whatever it wishes to do in the current environment. Clearly, the "mortgage meltdown" has now become a "credit crunch" and with the current action by the Federal Reserve it seems we are heading into something much worse, "derivatives destruction". There clearly is the potential for financial armageddon.

On Monday, a proposal will be announced by the Treasury Department that the Federal Reserve be granted the power to regulate the ENTIRE financial industry under a Treasury Department proposal. This is out of control. My initial comments upon reading this cannot be written for this blog as they are unprintable. The Federal Reserve is not a government entity and now it will have control over all government agencies like the S.E.C. and Commodities Futures Trading Commission? One of my favorite movies is "Butch Cassidy and The Sundance Kid". In the movie, they are being chases by a posse and Sundance keeps asking Butch, "Who are these guys?" We need to be asking the same question of the Federal Reserve.

They are ones that got us in this mess in the first place and now they want to regulate everyone? Give me a break. A little education is in order here. The last Federal Reserve Chairman was Alan Greenspan. In 1999, he decided to grow money supply at 30% so that there would not be a run on the banks if Y2K became an issue. It did not. Everything worked fine on January 1st and Greenie then had to slow the supply of money back to 0% or inflation would have gotten out of control. This action caused the tech crash of 2000 to 2002. The only way out of the problem was to drop interest rates to levels so low that Crazy Eddie would proclaim "these interest rate levels are insane". With low interest rates, the subprime loan came into being and several years later here we are with a mortgage meltdown.

Understand the Federal Reserve was designed to regulate the banking industry and now it is going to be extended to all bodies? This is not the answer. Rather regulators need to do their jobs and constantly monitor and understand the direction that all financial bodies are headed.

The massive amounts of derivatives that have been created were never questioned until they became an issue. How many people in the financial industry even understand SIVs or CDOS much less auction rate notes? Suffice it to say this is an awful proposal and it needs to be scrutinized by all Americans and not receive blank check approval.