The SEC's Envious of a Powerful Fed

Cox envy! Larry Kudlow (CNBC’s Kudlow & Company) was even bolder than me tonight in describing today’s House Financial Services Committee hearing that hosted SEC Chairman Christopher Cox and New York Federal Reserve Bank President Timothy Geithner. Geithner continued Treasury Secretary Hank Paulson’s mantra that the Fed needs to regulate anyone that has access to the discount window. Cox said "hold on cowboy; the Fed is not going to take over the world."

Geithner explained that the Fed needs deep information about any financial institutions that the Fed will have to save. Such information can only be obtained by being the chief regulator. Constant monitoring is the only way the Fed can act quickly and safely to head off systemic risk in a financial emergency. Additionally, the Fed needs to monitor the money it lends to financial institutions, from the discount window or any other form.

Cox and Geithner disagree on which regulator should supervise the liquidation of failed investment banks. Cox believes the SEC should handle the orderly liquidation of any non-depositary institution. Naturally, Geithner would like to extend the Fed in this direction.

Cox coined Paulson’s Blueprint for regulatory reform as “big think” and wants to focus on the near term. He clearly disagreed with a smaller or even nonexistent role for the SEC. Cox said that he did not support Paulson’s Blueprint and that each regulator, including the Fed, had their own opinions. Cox is now challenging the most powerful man in financial Washington. He is far bolder than the subservient Federal Reserve Chairman Bernanke.

Cox admitted that he was pressured by the Treasury and Fed to protect the primary dealers, and Fannie Mae (FNM) and Freddie Mac (FRE) from abusive naked short selling. Under questioning, he said that the protection would be extended to all stocks in the future, but did not see any problems now. Cox wanted instead to bring enforcement actions against those intentionally spreading false rumors. I guess unintentionally spreading false rumors is OK.

Cox further expressed concern that investment banks would give up access to the Fed if access entailed being regulated as commercial banks. He warned that innovation would stop under the Fed’s watchful eyes. As the Fed is assuming more power, the investment banks are shying away from its offerings. Jamie Dimon, JP Morgan’s (JPM) CEO was right; if you grab the cookies you are going to get spanked. Cox says the investment banks are saying “no thanks” to the Fed’s cookies.

They could not even agree on the importance of fighting inflation. Cox said inflation is the enemy of stockholders, whom the SEC is here to protect. Geithner said saving the banks is more important than fighting inflation.

Kudlow ranted that Cox was envious of the power that comes with the Fed’s discount window. I believe it’s more that the balance of power has shifted too far away from the sleepy SEC. And when the SEC finally woke up, it found itself robbed and violated.

Disclosure: Author is long FNM, FRE and JPM.

Comments

[horatioatthegate]

"Sleepy" is not the word.

Cox should be drawn and quartered. He should get the Jesse Jackson treatment.

Talk about a worthless, do-nothing whinner.

[horatioatthegate]

whiner

[mark mchugh]

hear, hear Horatio!

The SEC is not useless (quite the contrary), but it will remain useless as long as Cox is in charge. The only question I want congress to ask him is, "why are you still here?"

Bye-bye, Chris, bye-bye

[iThinkBig]

The music has just gotten faster in the musical chairs game. You have a party that has consolidated power and has demonstrated it can successfully throw it's weight around to anybody in this country. Socialism for the rich is not a powerful enough description of the government and party in power (Dems). It's becoming Fascist.

Note, Adolph Hitler appeared benevolent to all until he first consolidated power under the Nazis, it was all for the good of the people and the stupid masses gobbled up the propoganda.

Then, he assasinated political adversaries. In our country this would be political assasination, we are already seeing big signs of this with opposing party members made to look incompetent and shown the door.

The stage afterward is fleecing of the masses. In Adolph's day, it was the Jews that were named the bogeyman and fleecing commenced to cover deficit shortfalls to accelerate the power of the police state.

The last stage is of course a Gestapo and direct confiscations of property because every law created by the party power means the entire citizenships breaks the law in any action they take. People turned in Jews and were rewarded and the Fascists had a 'legal' right to confiscate private property. The citizens gobbled up the Jew bogeyman propoganda, an easy scapegoat for there 40 years of economic stupidities. We are seeing 25 years of our economic stupidies and are going the EXACT SAME ROUTE.

Fascism still gives some the illusion your private enterprise is free when it no longer is, the State can confiscate it at will, manipulate entire sectors of an economy and force the bogeyman to cough up. Right now, there is no named bogeyman besides 'global warming' and attempted Co2 tax scams. Since the American public at large has caught on, there will soon to be a group within the country that is named the bogeyman for fleecing, because the middle class Americans are catching on that devalued currency and deficits are the invisible tax to pay for beaucratic chronie capatalism and lack of innovation that consistently propels a free society.

Don't believe me about Fascism? The SEC spreading rumors crap, Sheila Bane stating how they will now pay attention to blogs to prevent 'misinformation' Chris Dodd stating to WSJ that he expects something in return for a bailout shouldered by the taxpayers! This kind of crap is exactly what occured in pre-WWII Germany and recently in Venezuela. This information should help you protect your wealth my friends, that is why I post it.

Good luck to you all, I believe we will have a peaceful political revolution in a few years and the wealth will come back from the East to the West again. Next sustained Bull market is in 2013 from my best guess and connection of hundreds of variables, political and economic.

[flow5]

I am inclined to the opinion that these decision-making processes (supervision and regulation) should lie entirely with the Board of Governors, and that the Board should be reconstituted to include the Secretary of the Treasury, the Comptroller of the Currency, the Chairman of the Federal Home Loan Bank Board, the Director of the Federal Deposit Insurance Corporation, the Director of the Office of Thrift Supervision, and the Chairman of the Securities and Exchange Commission.