Federal Deposit Insurance Corp.
Daniel Gross has a good column in Slate about how Wall Street always claims regulation will ruin it, and it always wrong: My general rule of thumb is that we should generally ignore what Wall Street has to say about financial regulation. Investment banks lack the common sense to know what's good for them. The financial sector opposed all the regulations that were good for it in the 1930s—i.e. the advent of the Securities and Exchange Commission and the creation of the Federal Deposit Insurance Corp.
Even by the standards of politics, Republican opposition to financial reform is unusually shameless. The GOP party line, in keeping with the postmodernist stylings of Frank Luntz, is that they oppose financial regulation because it's a big handout to the financial industry. Here's Mitch McConnell: This bill not only allows for taxpayer-funded bailouts of Wall Street banks; it institutionalizes them. “The bill gives the Federal Reserve enhanced emergency lending authority that is far too open to abuse.
Right now, the question everyone is asking about the Paulson plan is: Will it pass? But the real question they should be asking is: Will it work? To read the headlines, you might figure the details had all been hashed out. But the deal is really just a blueprint for a program with a lot of blanks, to be filled in later. In all fairness, details about derivative pricing aren't exactly Pelosi and Boehner's forte, and it's probably a good thing they've left them to the experts. But that leads us to detail number one: Who will be the experts actually shaping the program?