by Chidem Kurdas
“A just war” is how Treasury Secretary Timothy Geithner describes the movement to expand financial regulation. “It’s a war of necessity, not a war of choice,” he is reported as saying about the battle to impose greater government control on the financial sector.
This is the man who presided over the New York Federal Reserve Bank as the Fed assiduously provided the monetary fuel for the over-expansion of credit and the associated property bubble. The eventual implosion of the twin bubbles caused the financial crisis of 2008.
For sure, markets are prone to ups and downs, because people are prone to behaviors like herding. And yes, bankers drank the spiked punch, as did myriad others from mortgage originators and real estate developers to over-extended households. But the Fed provided the heady stuff, thereby creating a boom-and-bust cycle of extraordinary magnitude.
Now, does Mr. Geithner’s proposed regulations seek to prevent similar nefarious policies in the future by limiting the Fed’s discretionary powers? Of course not. Silly even to ask. His quest is to expand the authority of government agencies, not to regulate them.