The biggest regulatory overhaul since…?

You’ll hear a lot of sound bytes today about the Bush administration’s proposal to deal with the latest Wall Street scandals as "the most sweeping regulations since the Great Depression" or some such drivel. Don’t be fooled. This second major wave of venal crime in Mr. Bush’s presidency will be dealt with no more effectively as the first, perhaps less so.

All you need to know was in this Sunday preview in the New York Times:

Although the proposal would impose the first regulation of hedge
funds and private equity funds, that oversight would have a light
touch, enabling the government to do little beyond collecting
information — except in times of crisis.

The regulatory umbrella
created in the 1930s would grow wider, with power concentrated in fewer
agencies. But that authority would be limited, doing virtually nothing
to regulate the many new financial products whose unwise use has been a
culprit in the current financial crisis.

Another interesting take this morning from Mother Jones:

There remains an enormous deregulatory elephant in the room that no
one is addressing, but rather everyone accepts as an irrevocable
presence—Glass-Steagall repeal. In the face of current debate about
whether more oversight will fix our nation’s housing problems or the
banking credit crunch of its own making, there is a steadfast refusal
to consider that change can mean relying on past measures that have
proven effective.

The banking system simply must be regulated at source. Thanks to
Glass-Steagall repeal in late 1999, so-called commercial banks today
are merely composites of investment and commercial banks that can
manufacture loans on one side of their balance sheet and trade them on
the other.

In other words, the way is clear for more CEO malfeasance, more looting of America’s wealth, more crony capitalism, another bubble. Sadly, the gutted business staffs of America’s dumbed-down newspapers — which have also eliminated most of their independent coverage of Washington — will miss all this.

The current mess is only a preview of the damage that will be done by a combination of a largely unregulated shadow capital market, weak oversight and crippling American debt and other economic vulnerabilities (poor education, falling capacity to produce things of real value, a conservative entitlement society, etc.).

Biggest irony: The Fed is being given new responsibility to identify crises before they happen. Yet the housing bubble was created largely by Alan Greenspan’s Fed.