gObama, round II

Yesterday President-elect Barack Obama formally announced his plans to overhaul the regulatory structure of the financial industry:

“…what I said during the campaign, I meant. We are going to have to greatly strengthen our regulatory apparatus.”

Hallelujah! As regular readers of the blog know I spent considerable time in my first several weeks outlining the case for what needed to happen in order for investors, the American public, and the economy to begin operating with a restored sense of confidence. Chief among those points was the need for increased regulation. So what did Obama specifically announce yesterday?

He outlined several major points:

• The need for streamlined authority
• Agency consolidation
• Spreading financial oversight beyond just the banking industry
• The need for new regulations

The institutions that are not currently regulated well and that will receive particular scrutiny are, not surprisingly: mortgage brokers, private-equity firms and hedge funds. Do you recall that in an early posting I said that no one regulator had complete transparency into the system? This is, and has been, a very dangerous situation. Hopefully the new Administration will have the absolute backbone to hammer through the necessary regulations that lead to regulatory transparency.

By consolidating multiple regulatory agencies it will hopefully eliminate a seemingly uniquely American thing: businesses shopping around for the regulator whose rules are the most lax and that most allow bad behavior. Coupled with this will be a clear delineation of responsibility so that the left hand knows what the right hand is doing.

I was also encouraged to see the President-elect include Congress in his calling out of responsible parties. He said unequivocally, “We have been asleep at the switch, not just some of the regulatory agencies, but some of the congressional committees that might have been taking a look at this stuff. We have not been as aggressive, and we’ve had a White House that started with the premise that deregulation was always good.”

It gives me tremendous confidence as an investor that the incoming Presidential administration “gets it.” And as I have said from the beginning of this little blog, once the people and institutions are changed and new ideas are introduced by both of those parties, then investor confidence will begin to return. Thus, I praise yesterday’s substantial announcements by the President-elect.

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Separately, yesterday I received positive feedback from several more readers and I wanted to acknowledge the feedback. Thanks very much and spread the news of the blog if you are enjoying it. I began the blog to disseminate information that I thought was missing from our National dialogue about the economy and the world of finance. Hopefully some of this information has not only been interesting, but useful.

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I hope that each of you has a wonderful weekend!

Jason