The W administration is proposing to shuffle the regulatory deck in response to the implosion of the subprime mortgage market. Of course, if regulation is the problem the solution would be to restructure the highly conflicted management of the agencies that are supposed to monitor Wall Street activity. The current regulatory agencies have senior executive ranks that are chock full of Wall Street professionals whose post-bureaucrat employment would be adversely effected were he or she to be too, or at all, strict as a regulator.
Of course tighter monitoring of more open financial reporting of all the chicanery on Wall Street would be desirable, because the depth of most recessions can be attributed to the irrational exuberance that Wall Street has always demonstrated during economic up cycles. But the most effective solution to this, and the historic Savings and Loan collapse of 1986, would be to grant authority to the bankruptcy courts to restructure the debt secured by one’s home.
The Wall Street alchemists scream most loudly at the latter suggested regulatory move, because it would interfere directly with their efforts to try to turn arcane paper into currency. This is, of course, the best reason to do it.