Re-regulation of the financial system is upon us. The "free market", which has been free since the New Deal, is about to acquire some more diligent overseers.
According to Bloomberg.com, Ben Bernanke speaking today at the Economic Club of New
York said that
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Officials should review how supervision and interest rates can minimize the ``dangerous phenomenon'' of bubbles in housing, stocks and other assets that risk bringing the financial system and economy down with them when they burst..."
``There is no doubt that as we emerge from the current crisis that we are all going to look very hard at that issue and what can be done about it,''
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This is a clear signal that the swing back towards more regulation of the financial markets is likely to accelerate in the next several years. Beginning with Enron in 2002, and continuing through the rise of Elliot Spitzer here in NY State, the idea that government needed to keep a closer eye on business in general has been growing in popularity. It remains to be seen how it will play out in the context of the financial and housing crises going forward. Issues that will probably continue to stay on the front burner:
- pensions
- how the Government stake in the Banking industry is sold off
- the deficit as it affects stimulus spending in a recession
If any of this issues make it harder to get a lender to agree to a mortgage, the effect upon the housing slump may be amplified.
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