Monday, March 16, 2009

The return of Regulation Q? 

A better idea, even Warren Buffet seems to agree, might be to halt the visible taxpayer handouts on the banks' asset side. Let the massive guarantees already in place on the banks' liability side do the work of bailing out the system via the fat spreads banks are now earning above their government-guaranteed cost of funds. The advantage: It's relatively invisible and/or can be claimed that it's being done for the good of depositors, not bankers.
From Holman Jenkins in this morning's Political Diary (subscription required.) One hopes this does not mean a restriction on competition for deposits; our experience with Regulation Q and the savings and loan debacle should be instructive. I think it instead will mean the continued provision of cheap credit via the Fed; Bernanke said last night as much.
Mr. Bernanke's TV appearance obviously took place with approval from the White House...
I don't know how Jenkins knows that, but if so it's distressing to see Chairman Bernanke toss away the Fed's independence quite so blatantly. Cooperating is one thing, seeking approval is quite another.

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