Wednesday, May 04, 2005

Political Brinkmanship On "Financial Meltdown"

It's hard to tell if Sen. Richard Shelby is playing hardball or setting us up to get nothing out of congress on the GSE's. "'I will not support a bill that does not establish a regulatory structure with capital authority and enforcement powers that are needed to ensure the safe and sound operations of the GSEs,' the Senator said.

It is amazing how calmly the size of the problem is discussed. "Shelby also said he won't back legislation that doesn't give the regulator the ability to reorganize either company in the event of a financial meltdown." If Fannie or Freddie "meltdown", the world would likely go into depression!

Shelby also sees the insurance link. "His committee will continue to scrutinize the recently hard-hit insurance industry. 'I believe that we must closely consider the present regulatory regime to determine whether it is adequate to address current intricacies' of the insurance market. Many large financial institutions hold significant chunks of the $1.8 trillion in debt issued by Fannie and Freddie, so Snow and Greenspan have warned a crisis at either company could hurt markets."


At 5:12 PM, Blogger realist said...

tighter regulation of fannie and freddie has been part of the ongoing political tug of war between democrats and republicans for years. i doubt shelby has any interest in fannie and freddie other than getting power over the dems, who want to see the companies left alone. i doubt that either party cares much about the bubble. this is probably more about who gets to control these agencies' govt sanctioned money laundering operations for the mega-billions in chinese & japanese trade surplus money.

At 5:27 PM, Anonymous Anonymous said...

"mega-billions in chinese & japanese trade surplus money."

Agreed. Luckily, the dollar will soon crash (becasue AG won't do squat about rising rates nearly enough) and so the Asians will now be forced with a tough decision. Continue buying ever-larger boatloads of treasuries to prop up the dollar, or watch their cheap goods get more and more expensive.

One way or another, these horrible imbalances will straighten themselves out.

At 6:14 AM, Anonymous Anonymous said...

Long Bond Back


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