Thursday, July 22, 2010

Confusion About FINREG's Effect On The Finance Sector & The US Economy

Obama, in pre-released remarks yesterday, was quoted as saying that the FINREG bill will be 'good for consumers and good for the economy.'

He couldn't be more wrong- on both counts.

The new financial sector overhaul is going to result in politically-designed credit allocation and shortages. Fannie and Freddie were left completely untouched, while politicians crow about making the new financial world safe for all.

Then there were the lies from our president about 'no more taxpayer-funded bailouts.' Really? Funny, because, if anything, the new legislation gives the FDIC more latitude than ever before to declare insolvencies, while Fannie and Freddie retain their taxpayer-funded, open-ended allowances to run unlimited losses.

How does that square with 'no more taxpayer-funded bailouts?'.

For the economy, there is vastly more uncertainty, which translates into withheld investment and hiring. Thousands of new regulations are yet to be written by agencies, which means continuing uncertainty and expensive lobbying as various affected parties vie to have regulatory details skewed in their favor.

Nice work getting it wrong on two fronts. Messing up a sector in need of clarity and less government interference, while at the same time, injecting so much uncertainty into lending and asset management that investors will stay on the sidelines, rather than commit capital and create jobs.

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