The Treasury plan would let Fed officials examine the practices and even the internal bookkeeping of brokerage firms, hedge funds, commodity-trading exchanges and any other institution that might pose a risk to the overall financial system.
That would be a significant expansion of the central bank’s regulatory mission.
then we know that the Masters of the Universe are going to have some of their "freedom" curtailed, such as keeping goofy assets "off the books":
When Mr. [Barney] Frank asked why Citigroup had kept billions of dollars in “structured investment vehicles” off the firm’s balance sheet, he recalled, Mr. Prince responded that Citigroup, as a bank holding company, would have been at a disadvantage because investment firms can operate with higher debt and lower capital reserves.
Of course, much more is required and
Frank Partnoy and other have some good ideas, starting with the duplicitous ratings agencies:
Which leaves the alternative suggested by Partnoy and several economists: cleansing the federal code of its reliance on bond ratings. Among the simplest fixes would be removing the ban on pension funds' holding debt securities rated lower than BBB. The funds can make far riskier investments in stocks and hedge funds, after all. Bank-capital requirements do have to take into account the quality of securities, but there are market-based measures that could at least partly replace ratings.
"The experiment we ran with government relying on the ratings agencies to do its job has failed," Partnoy says. Time for a new experiment.
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