The big news out of yesterday was the financial overhaul announced by the Treasury Department. (Alphonso Jackson's resignation got very little play. Maybe the timing was deliberate?)
Today one of the big questions is: Will it really work?
In the short term, the financial overhaul proposals won't really do much. Most of what Henry Paulson talked about has to be approved by Congress. And Democrats are already making noises about how regulation needs to be tighter than the Treasury depart suggests. Practically, it will take months -- if not years -- to actually get things going.
Another thing to consider is that many of the new regulations are somewhat toothless. Even though the Fed will have expanded powers in theory, the ability to investigate hedge funds and private equity firms is fairly limited. A financial crisis almost has to breaking in order for investigations to take place.
Another item noticeably missing in the financial overhaul is a serious plan to create national standards for mortgage lending. While a proposal to oversee mortgage loan origination practices of the States was made, it does little to stop practices that led to the current subprime mortgage mess. (You know, practices like hiding risky subprime debt amongst less risky securities in packages.)
But, I suppose it's a step in the right direction, albeit a small one. The main problem I see, though, is that it seems like regulation for regulation's sake. Most of the proposed financial overhaul regulations will do very little to change "business as usual."
What do you make of the financial overhaul?
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