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Reply #8: Why Geithner's outburst bodes ill for regulatory reform [View All]

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jakeXT Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Aug-04-09 02:31 PM
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8. Why Geithner's outburst bodes ill for regulatory reform
Edited on Tue Aug-04-09 02:31 PM by jakeXT
Posted by: Felix Salmon

The news that Tim Geithner “blasted top U.S. financial regulators in an expletive-laced critique last Friday” is certainly noteworthy, but I must admit to a lingering suspicion that Geithner exploded in such a manner only because he wanted the news to be leaked.

I can imagine the assembled regulators sitting at Treasury, sharing puzzled glances as Geithner went on his tirade, and then thinking “oh, now I get it” when they saw this morning’s WSJ. Geithner has been losing control of the regulatory-reform news agenda of late, and now he’s sent a clear and public message that any regulator standing in public opposition to his plan will be viewed as being in opposition to regulatory reform more generally. It’s a pretty effective way of quashing public debate, during a time when public debate is, at the margin, only going to delay or weaken any eventual reform.

The risk, of course, is that if regulators aren’t allowed to oppose Geithner’s plan in public, then they might just quietly start siding, emotionally, with the financial-services industry which generally opposes any new regulation at all. And if new regulation does come in, then already the regulators will have been largely captured by the banks they’re supposed to be regulating.

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