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<a href="http://tinyurl.com/2k9jj4">Regulatory minimalism allowed risky practices to flourish, expert says.</a>
<p> Separately, Bank of America, JPMorgan and Citigroup are leading a plan to raise $80 to $100 billion to help buy some of the assets held by SIVs facing collapse. </p>
<p> But these same international bankers spent last weekend in the corridors of the International Monetary Fund's annual meeting urging government officials not to rush to adopt new rules to get the financial market turmoil under control. </p>
<p>Schlesinger calls this reaction by bankers "misguided, predictable and familiar."</p>
<p>"It is sort of stunning that as the biggest banks prepare to conduct a bailout of unprecedented scope, they are at the same time warning for excessive caution on the regulatory side, which is exactly the type of approach that might have spared some of them the consequence of their own worst excesses," he said.</p>
<p>But the Fed and the SEC opted against coming out with a list of new guidelines, stating that they favored a principles-based approach rather than a more prescriptive approach to regulation. Schlesinger contends this resulted in the agencies issuing final guidance in 2006 "that in essence said do whatever you want -- anything goes." </p>
<p>"This is a perfect example of the unwillingness of the Fed to take a strict approach to policing structured finance products has come back to haunt the entire system," he said. </p>
In addition, the Fed also could have dampened the Wild West market conditions for subprime mortgages that resulted in so many poor loans due to fraud, says Schlesinger.
<p>In an interview on the CBS News' program "60 Minutes," Greenspan said the Fed couldn't stop subprime mortgage originators.</p>
<p>Schlesinger disagrees. Although the abuses came from independent originators and not banks, Schlesinger said the Fed had "all or most" of the authority it needed to police the market under two laws passed by Congress. </p>
<p>"The Fed's unwillingness to flex the muscle that those statues granted is a real black mark on the central bank," he said.</p>
<p> Separately, Bank of America, JPMorgan and Citigroup are leading a plan to raise $80 to $100 billion to help buy some of the assets held by SIVs facing collapse. </p>
<p> But these same international bankers spent last weekend in the corridors of the International Monetary Fund's annual meeting urging government officials not to rush to adopt new rules to get the financial market turmoil under control. </p>
<p>Schlesinger calls this reaction by bankers "misguided, predictable and familiar."</p>
<p>"It is sort of stunning that as the biggest banks prepare to conduct a bailout of unprecedented scope, they are at the same time warning for excessive caution on the regulatory side, which is exactly the type of approach that might have spared some of them the consequence of their own worst excesses," he said.</p>
<p>But the Fed and the SEC opted against coming out with a list of new guidelines, stating that they favored a principles-based approach rather than a more prescriptive approach to regulation. Schlesinger contends this resulted in the agencies issuing final guidance in 2006 "that in essence said do whatever you want -- anything goes." </p>
<p>"This is a perfect example of the unwillingness of the Fed to take a strict approach to policing structured finance products has come back to haunt the entire system," he said. </p>
In addition, the Fed also could have dampened the Wild West market conditions for subprime mortgages that resulted in so many poor loans due to fraud, says Schlesinger.
<p>In an interview on the CBS News' program "60 Minutes," Greenspan said the Fed couldn't stop subprime mortgage originators.</p>
<p>Schlesinger disagrees. Although the abuses came from independent originators and not banks, Schlesinger said the Fed had "all or most" of the authority it needed to police the market under two laws passed by Congress. </p>
<p>"The Fed's unwillingness to flex the muscle that those statues granted is a real black mark on the central bank," he said.</p>
