The Fed Did Its Job, Swears Governor Tarullo, and Will Totally Do it Even More Now
Crap, there is really no way this can turn out well.
The Fed Board of Governors pressing hard on regional Fed banks could actually turn out in our favor if I'm right in my perception that "The System" is beginning to show signs of wear and tear. The more conflict that can be introduced across "The System" the better so I'm pretty much all for that idea.
What I am not for is the most diabolical arm of the Fed (the Board, naturally) reaching out its tentacles to squeeze down hard on the regional banks simply because that cookie cutter Washington mentality is what got us here in the first place. Besides, it's not like the fuckers at the Board know what they're doing (see also: the entire financial crisis and a 95% devaluation of the US Dollar since its inception in 1913... just sayin).
Never content with standing around twiddling its evil little thumbs, the Board insists that not only is the Fed best equipped to serve as Regulator above all Regulators, it's OMG Teh Bestest Regulator EVAR! Watch what we can do!!
(LOLZ! The attempt is cute, will surely lose a little luster in practical application. Shame when that happens, isn't it?)
“The crisis has revealed significant risk-management deficiencies at a wide range of financial institutions,” Tarullo said. “It has also challenged some of the assumptions and analysis on which conventional supervisory wisdom has been based.”
While not giving many details on the supervisory overhaul, Tarullo indicated that the examinations, now run largely by Fed district banks across the country, will be bolstered by the board in Washington.
He said the Fed is “creating an enhanced quantitative surveillance program that will use supervisory information, firm-specific data analysis and market-based indicators to identify developing strains and imbalances that may affect multiple institutions, as well as emerging risks to specific firms.”
“This work will be performed by a multidisciplinary group composed of our economic and market researchers, supervisors, market operations specialists and accounting and legal experts,” Tarullo said.
Banks and other financial institutions have reported more than $1.5 trillion in credit losses and writedowns worldwide since the global credit crisis began. Many of those losses stemmed from mortgage-related investments that declined with the collapse in the housing market. [Market Ticker says we've got another $2 trillion in writedowns to go and I tend to agree with KD's assumption]
Tarullo didn’t discuss the outlook for the U.S. economy or monetary policy in his testimony.
He said the central bank will soon release guidance on how to “promote compensation practices that are consistent with sound risk-management principles and safe and sound banking.”
The Fed governor also said that General Electric Co. and companies that already own finance arms or industrial-loan businesses, known as ILCs, should be able to retain them without being subject to Fed oversight of manufacturing and nonbank operations. While the Fed favors not adding more ILCs, existing structures should be “grandfathered” and not forced to separate “in the interest of fairness,” he said.
GE has supported no changes to the status quo so that it can keep its manufacturing operations along with its GE Capital finance arm without having to separate under a bank holding company structure. Last week, Representative Barney Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, supported Fairfield, Connecticut-based GE’s stance. GE has said it is in favor of systemic regulations and expects change in the rules governing its finance arm.
Hey since when is the Fed concerned with "fairness"? That's new!