Treasury Plan: Short Housing and Insurance

3/31 - "...Jay Baris, a financal services partner at the law firm Kramer Levin Naftalis & Frankel, noted: "The Treasury Department seeks to balance the goals of stabilizing our financial markets while encouraging innovation. These may be hopelessly incompatible."

"Paulson's proposal is an opening salvo in a debate that will probably go on for some years. With the number of home foreclosures rising and the markets still nervous despite the rescue of Bear Stearns, the question is whether this is a debate that should be a priority for the administration.

"It's probably a bad idea to spend too much time debating the organization of the fire department while the fire is still burning," Larry Summers, the former Clinton administration treasury secretary told the Wall Street Journal."

3/31 - "Buffett in stark contrast to Greenspan called the explosive use of derivatives an "investment time bomb".

It's perfectly clear now who was right. For those who have not pieced the story together properly, it was fear of a dominoes style chain reaction collapse of Credit Default Swaps starting with Bear Stearns that caused Bernanke to force a shotgun wedding between Bear Stearns and JP Morgan.

So what does the Treasury Department propose? The Orwellian answer of course is to give the Fed still more power to wreak havoc."

"In the long run, the only solution is to abolish the Fed, end government sponsorship of the ratings agencies, and return to sound monetary policies in Congress with a currency backed by hard assets instead of promises.

Instead, the proposal is to give Fed increased authority to watch over additional henhouses. And if there's one thing worse than the fox watching the henhouse, it's the Fed watching the henhouse. A quick look at history should be enough to convince anyone of that."

3/29 - "I think it's a clever way to use the current credit crisis to loosen regulation on the financial industry while doing little to fix the current problem or prevent future ones. A better way would be to nip future problems in the bud by changing financiers' incentives -- requiring them, rather than taxpayers, to foot the bill for the bad deals they originate -- and shedding far more light on their dealings...I don't think the proposed scheme would have prevented the current credit crisis."

"This administration has used crises in the past to justify its agenda of tax cuts and reduced regulation on business. For instance, it used the 2001 recession to justify $1.3 trillion worth of tax cuts much of which went to the wealthiest 1% of Americans. Paulson's proposal is a thinly veiled attempt to use the current credit crisis to slash regulation on financial institutions without addressing its real cause."