Cheeks Precinct Resolution in Support of an Independent Regulator of the Financial Markets and Banking System

At its meeting on March 9, 2010, the Cheeks precinct adopted the following:

Resolution in Support of an Independent Regulator of the Financial Markets and Banking System

Whereas, the deregulation of financial markets and the banking system were major contributing factors to the financial collapse which began in late 2007 and which included the collapse of Bear Stearns on April 2008 and Lehman Brother in September 2008 (1); and

Whereas, the most important regulator for the financial markets and banking system is the Federal Reserve Board of Governors, and

Whereas, the Federal Reserve Board of Governors, in testimony before the Congress and in repeated statements before the public - including most prominently the current and previous Chairmen of the Federal Reserve, Ben Bernanke and Alan Greenspan - have consistently, repeatedly, and aggressively argued that the financial markets and banking system are best left to regulate themselves (2); and

Whereas, the Federal Reserve Board of Governors, not only failed to regulate the financial markets and banking system before the financial collapse, but continues to refuse to perform its regulatory function, and in fact refuses to provide Congress information Congress has lawfully and dutifully requested (3);

THEREFORE BE IT RESOLVED, that any new approach, structure, or agency, designed and intended to regulate the financial markets and banking system ought not and should not be made part of the Federal Reserve system, or subjected to the power, authority, or influence, of the Federal Reserve system in any way or manner (4); and,

BE IT FURTHER RESOLVED, that any new approach, structure, or agency, designed and intended to regulate the financial markets and banking system ought and should be carefully insulated and separated from any pressure or influence from the Federal Reserve system, and from companies and individuals make their livelihoods in the financial markets and banking system, to make it as independent as possible. (4)

REFERENCES

(1) Retired Federal Reserve chairman Alan Greenspan has recently written a paper arguing that the lack of regulation was the sole cause of the financial collapse. Barry Ritholtz dissects Greenspan's paper, and shows that while lack of regulation was an essential cause, the actual precipitating cause was Greenspan's unprecedented low interest rates after the dot com bubble burst. Ritholtz concludes that Greenspan's "incompetence as a regulator made his incompetence as a central banker even worse." See Explaining the Impact of Ultra-Low Rates to Greenspan.  Nobel Prize economist Joseph Stiglitz presents his view of how deregulation was a major cause of the financial crisis, in laymen’s terms, in Vanity Fair, January 2009, Capitalist Fools.

(2) For example, Alan Greenspan, speech, delivered while he was Chairman of the Federal Reserve,  "Government regulation and derivative contracts" Coral Gables, FL, February 21, 1997.

(3) See Fed Refuses to Tell Who They Gave $2 Trillion Dollars To and the Congressional Oversight Panel’s first report, Questions About the $700 Billion Emergency Economic Stabilization Funds.

(4) See Stiglitz, Nobel Prize-Winning Economist, Says Federal Reserve System ‘Corrupt’; A financial reform political circus; Do-Nothing Fed Regulator = Huge Bank Victory; and Federal Reserve's Past Errors Undermine Its Request For Expanded Authority.