The Fed Writes Back

Before writing the post "Reg T and Social Security" a couple of weeks ago, I wrote the Federal Reserve to confirm that it had the power to change margin requirements. Yesterday, the Fed wrote back:

The margin requirements for broker-dealers and other lenders found in Federal Reserve Regulations T and U can be raised or lowered by the Board of Governors of the Federal Reserve System. The last change, a decrease from 65 to 50 percent, occurred in 1974.

"Madoff Scheme Uncovered"

Hat tip to reader S.L. for this.

"Obama Hears a Giant Sucking Sound"

Holman Jenkins in Wednesday's Wall Street Journal, "Obama Hears a Giant Sucking Sound". Excerpt:

His friends advise Barack Obama to launch a "New" New Deal. Maybe that's because the old New Deal is sinking fast.

Mr. Obama's one deeply false note during the campaign was his harping on "deregulation" as if that were the source of current troubles. His real problem is the crack-up of the world FDR built.

Fannie Mae was a New Deal creation, subsidizing the securitization of mortgage debt. FDR's successors piled on the subsidies for housing debt and incentives directed at low-income borrowers. Kaboom.

Then there's the UAW, born in 1935. For decades the UAW steadily traded away domestic auto market-share to imports and transplants to keep its aging membership toiling away toward their golden pensions and collecting wages and benefits twice those of their competitors. It worked for a while . . .

Mr. Obama must be looking around and beginning to suspect he will be pouring his political capital, along with considerable taxpayer capital, down bottomless holes for the next four years. He won't be building a legacy as the new FDR, but cleaning up after the last one.

Jenkins mentions AIG in this column too, and makes a point that most in the mainstream media seem to have missed: the notorious lavish retreat for independent insurance agents is part of how insurance companies get those agents to sell their products. Similar events are held all the time by mutual fund companies wholesaling their funds to financial planners or pharmaceutical companies marketing their drugs to physicians. It's how business is done, and now that the U.S. government essentially owns AIG, it is in the taxpayers' interest for AIG to get agents to sell its insurance policies.

The photo above, of Obama touring an auto plant, ran alongside the Jenkins's column.