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Listen we really needed let's go to -- near stadium Jeff magic of the policy research director.
At the sports Centre for economics policy analysis and Don Steele Gordon.
The author of the empire of well.
The epic history of American economic power good morning gentlemen thanks so much for being here -- appreciate you both joining me.
And John first let me walk through some of what we've heard at the end of the day it sounds as though the Federal Reserve Bank.
Is going to be the systemic risk regulator perhaps the most powerful regulator in the world is that a good thing.
Think it would certainly need changes in the regulation we've ham in the bank regulation over the last hundred years is just sort of grow them -- -- one regulator added onto another onto another.
And trouble was a course of bureaucrats -- home protect their turf before -- do almost anything else so we all of them.
-- -- cross purposes.
So Jeff and the interesting thing that we've learned is that it or -- we appear that we're gonna find out today.
He is that -- the -- reserve bank will be the systemic risk regulator.
But when we see it fit to take over an institution that could -- that kind of danger.
They have to get a sign off.
From the US Treasury Department.
Are you surprised by -- or is that appeasing those members of the house and the senate who suggest we're given the Fed too much power.
I think it probably is appeasing them I think I'm a little worried about this idea -- -- Risk regulator I do think we need serious new regulations for the man but it's not -- bureaucrats -- protect their turf.
It's Wall Street.
Management that protects its -- and headphones and so for them they're trying their best.
To do that now I do not know that -- systemic regulator simply by claiming we will decide in some informal undefined way.
When a bank is too big and jeopardizing the financial system.
Within that is literally going to be enough there will be in five and politicking there'll be.
As a general sense that the economy is -- at a certain time we can take on two minutes to.
More risk or not okay at a certain time becomes a very generalized.
Proposition and depends on who is implementing.
Implementation and enforcement.
Is probably more important than the actual rules in place.
You know Jeff it's interesting I know that you want somebody who buys into the fact that we do need reform.
That there were a great deal of loopholes and some of those -- -- loopholes frankly -- results of the repeal of the Glass-Steagall.
Dating back to the late ninety's.
Is this going to do.
What we needed to do which is to make sure that all different types of asset class is.
Are covered under specific regulators so that we are dotting our eyes and we are crossing our -- are we creating more loopholes.
Always fixing those -- well I'm not worried.
Specifically about that you know Wall Street was a runaway train -- any idea that we don't need to regulate this track.
I think is incorrect.
The extent of those regulations.
It is difficult to determine exactly what we need and I think frankly -- What bothers me a little bit about the Obama administration approach is that it wasn't open enough.
We have nothing remotely like Glass-Steagall which was being disbanded slowly actually since that.
I do think we have to reconsider whether a bank.
That takes saviors deposits that are insured by the federal government.
Or money market funds that promise and risk list returns and we've seen that have hasn't been the case and then go and buy or.
Fond investment banks to make risky investments within those institutions.
Should be allowed to invest in anything at all and by and large that's the system we've got to.
And just because there's a regulator watching over them.
To see that their practices are okay.
Will not jeopardize the rest of the economy is simply not be enough we may need.
-- reforms that separate the activities these institutions are allowed to do.
Okay John let's look I wouldn't demonstrate something shows something to our viewers because we -- taking a look just specifically at Citigroup.
An outlook and understand.
How many different regulatory -- over C a bank like Citigroup.
They have the Federal Reserve first inform -- the OCC.
The SEC BF DIC.
And the treasury.
Now a lot of people believe there's something wrong with this picture Vikram Pandit just spoke at the summit here one of the key points he talked about is that.
Quite -- facilitation.
Is now coming to the public sector in large -- as opposed to what was considered the shadow banking system.
That feels pretty dangerous to name.
What does this picture telling you about where we stand in our ability to regulate these institution.
Clearly I think is a good example of how the regulatory apparatus is just sort of grown without and the overall plan.
-- home because you know the financial markets have gotten more and more complicated more -- more diverse more more global.
And and so who have regulatory system has not been caught up and that is that's usually the case may unfortunately break new regulations usually come out of disasters.
Dominant -- took the Titanic together regulation of lifeboats for everybody.
And that happens in financial markets or anywhere else it's just the way the world works.
So and so John does the concept of a consumer protection agency did that scare you you like that isn't good thing.
That that scares me a little bit of what see many more details on that gets you know the one thing you don't want those regulators ending up functioning.
In -- way that the market should do the function.
You know -- over regulate all of them you know you stifle creativity and innovation and then suddenly -- -- bureaucrats commissioned the government.
-- effort but what we've seen in the last few months in the last couple of years in fact -- the market was not able to regulate itself.
Many dangerous products many complex products and just as we regulate kids -- -- And just as we regulate drugs the products for investors have been very complex and I think they need help.
-- and there are lots of people suffering and we better remind ourselves that.
They're not the conductors on the trend.
Who are really separates the passengers on that runaway train when it went off the tracks were separate and that's too.
We've got to protect its just plan on there.
Now he and -- Jeff I think to raise a great point I mean how many of us knew where our money market funds were tied up -- me.
There -- a lot of different assets that we thought was some of the safest assets.
In the world that when they either broke the buck -- saw what they were leveraged against.
We realized we weren't investing in safe asset classes so I think you raise a good point there.
Gentlemen thank you very much for taking the time.
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