Friday, August 24, 2012

Shapiro and the SEC are forced to swallow it

As we are on our late dinner break from the conference, the GNU agent joins me for dinner and engages into small talk about the events of the past ten hours. I return the favor and after a few brief exchanges which we used to ensure nobody really pays to attention to our corner of the conference room he looks at me and the only thing he says is XXJ followed by LMFS.

I examine his body language in order to determine if this is a serious proposal. He acknowledges my behavior and nods twice in order to confirm that my expertise is requested for those two projects. I feel honored that they thought of me. The GNU agent stands up and returns to his seat at the conference table as all of us do the same. Our meals are finished, small talk and deal making has been exhausted and we will focus back on the issues of this conference.

After we found out about Martin Wheatley, the FSA managing director charged with oversight into the LIBOR rigging scandal (UK regulator seeks BBA oversight; TheLastBear),and his push to implement oversight onto the BBA we are pleased to hear about Shapiro's defeat when it comes to her four year effort to force more regulation and oversight onto money market funds. The new are being delivered by the U.S. government representative present at the conference.

Money market funds are an alternative to bank savings accounts for individuals as well as companies. The $2.6 trillion industry lobbied heavily against more regulation and oversight as campaigned by the SEC's Shapiro. She had to drop her four year campaign as three fellow commissioners said they would not back her plan. The socialists immediately rallied and even called it a national disgrace. Others called on Mr. Barack Hussein Obama to pursue it through the newest social pest invention, the FSOC.

The FSOC was formed under the soon to be negative fallout from Dodd-Frank and is charged with oversight of the nations financial threats. A task they are neither qualified nor able to carry out. The Federal Reserve would love to have more power and the ability to seize those funds if they feel like doing so while others at the Fed said that banks could be penalized for drawing on those funds or that they need to back the funds with capital.

The FSOC lacks real power so far and the only thing they could claim is that money market funds are systematically important to the financial system. After they make use of their power the only thing they can do is to pressure the SEC into bigger oversight and more regulation which will result in the same thing defeat Shapiro suffered after wasting four years of her career on it.

Another option would be to categorize one fund family as systemically important and have the Fed regulate them. Either approach would eventually force the closure of the fund and eliminate liquidity from the system. Of course only a socialistic bastard would harm the system in such manner. First they applaud that their dog sniffed at the fund, then they label it systemically important and enact into policies which will close that systemically important part of the financial system.

In the end it was a nice victory for free market capitalism and a great blow to regulators with their idiotic proposals which result in nothing more but a dysfunctional system. Keep in mind that the financial crisis was initiated and evolved in the most tightly regulated sector of the financial world which was plagued by the greatest supervision.


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