The Obama administration wants to “fix” the financial system to avoid situations like AIG going cuckoo with credit default swaps.
I don’t trust them to not muck with things politically. And since nobody ever heard of a credit default swap before 2001 or so, what will our financial gurus think of that they don’t regulate? And what about London, Tokyo, Hong Kong, and Beijing where our laws have no jurisdiction?
This is yet another example of finger in the dike “leadership”. The PROBLEM, still unsolved, is the government, for political constituency payoff and fund raising reasons, caused some asset prices to raise in a bubble and large groups of unworthy borrowers to be lent money all backed by Freddie Mae/Freddie Mac/FDIC and other government sponsored entities. Those people got the profit if it worked, we got the bill when it didn’t.
ONLY when these GSEs are cut back will meaningful reform happen.
ONLY when private risk remains private will the risks be avoided. They can do that without new regulations, they just need to wean themselves from buying votes with other people’s money.
In other words, we are hosed.