Tags: obama | free | market

Wallison: Obama Fears a Real Free Market

By    |   Thursday, 18 Jun 2009 02:20 PM

Neatly tucked away in President Obama's recent speech broadly sketching his plans for government regulation of the financial system is the chief executive's fear of what free markets can do.

That's the opinion of Peter J. Wallison, a senior fellow at the American Enterprise Institute, writing recently in The Wall Street Journal.

"Although the president said in his speech that he supports free markets, these (proposed) initiatives confirm that the administration fears the 'creative destruction' that free markets produce, preferring stability over innovation, competition and change," Wallison wrote.

Provisions of the new regulatory powers which would be assigned to the Fed would "include requirements for capital, leverage and liquidity — for any firm 'whose combination of size, leverage and interconnectedness could pose a threat to financial stability if it failed.'"

Under the proposal, when and if a large financial firm hovers near failure, the Treasury may appoint a conservator or receiver to stabilize it, rather than allowing the company to go bankrupt.

The inevitable consequence of this proposal is a scramble among large financial firms to grow even larger and thus ensure their survival under the government's guarantee of systemic risk protection.

Meanwhile "smaller (firms) ... will have less opportunity to overcome the government-backed winners," Wallison wrote.

Even some influential Democrats are wary of the new role proposed by the Fed.

Senate Banking Chairman Christopher Dodd (D-Conn.) said there is concern about the Fed's ability to fairly, without a conflict of interest, monitor systemic risk while also setting monetary policy.

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Neatly tucked away in President Obama's recent speech broadly sketching his plans for government regulation of the financial system is the chief executive's fear of what free markets can do.That's the opinion of Peter J. Wallison, a senior fellow at the American Enterprise...
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2009-20-18
Thursday, 18 Jun 2009 02:20 PM
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