Ezra Klein gives us one view of financial regulation. Is it the correct view?–your guess is as good as mine! We are at least on the same page in considering this passage to be no real fix of the situation and danger. Some wildly inappropriate child asked me the very sensible question of How to fix the problem, and I said something like ‘Duh!" The entire embarrassment led me to study on the situation, and come up with a few ideas, though I doubt it is an original thought, or of esteem value.
My first generative concept is that the entire matrix of the Federal Reserve could be wrong. I would support a prohibition of the Fed from lending to financial institutions, or buying Government securities. I would allow the Fed to sell Government securities to aid the Treasury, but no purchase by themselves. I further would turn the Fed into a holding corporation, allowing them to only purchase Stock in private financial institutions. I would insist any such purchase must be of Voting Stock, granting the Fed capacity to intercede in lending and other bank practices. It quickly becomes a situation where the independence of the private financial institutions is restrained by national economic policy, if they desire to possess the funds for the expansion they crave. It also separate financial practice from Government public funding, forcing the Treasury to themselves enter the financial markets as a competitive player.
The question will arise at this point of How the Fed should finance their investment in the private banking industry. I personally believe that a new Pension Fund should be formalized, one that is mandatory, and somewhat rigorous in design. I would suggest that the new Pension Fund should have a mandatory 12% Payroll tax placed upon it, which must be matched by an equal Employer contribution, and one which is separate and independent of the current Social Security system; the later turned into a national Health Insurance system. All other forms of Investment by both Private and Public will be kept, though there is an obvious reduction to be expected in Wildcatting practices above normal 401k procedures. Private Accounts would be kept in all this, and the ownership of the Accounts specifically limited to the Contributor without Government intercession, but the Fed will retain the Voting power to continue their power over the banking sector. Did I mention that the Investment in this Pension Fund will be precisely limited to purchase of financial institutional Voting Stock, so neither Fed or Government develops an inclination to spread to other programs other than Contributor Savings? lgl