The Associate Press reports the Obama Administratoin is eyeballing a major overhaul of financial institutions. Many have been arguing for a long time (including our own magazine) that the Depression-era framework was inefficient, too costly and perhaps overwhelmed. Particularly when it comes to regulating retail financial institutions, the current system is out of date.
And they should tear down and rebuild the regulatory system. We've written extensively on this, so I won't go into it here. (Suffice it to say that most clients don't understand the legal nuances of registered rep versus an investment advisory rep of an RIA.)
I guess I have two quick points: I understand that financial institutions used too much leverage and regarded the new-fangled securities (credit derviatives and their ilk) as being virtually risk-free. But I still don't get why regulators and journalists are still blaming hedge funds. They didn't cause this one.
The second point is a reminder for all those policy wonks, legislators and lefties: It was my undersanding that securitization of loans was designed to create an off-balance sheet way get around regulations that prevented banks from getting involved in businesses they wished to enter. Regulators should remember that this go around.