Diary

From the Russian press, June 13-20

I don’t have much to say about this one, beyond that it sure is nice to see that there’s a media somewhere that has Obama’s number, even if it is a state-owned Russian newspaper.

Why I’m doing this (and that means that if any of you are Russian speakers, I welcome corrections!). Only one story this week. I was going to do a second, but I forgot to save it before turning my computer off, and it was only about Hillary Clinton breaking her elbow. This one’s much better.

Original.

Barack Obama (on?) the American central bank (June 19th)

Any financial transactions – whether by banks or corporations – must be rigidly monitored. For this reason, a Special Council for Supervision of Financial Markets will be created in the United States, and the powers of the Federal Reserve will be increased. This is his policy on statement on reform of financial regulations, said president of the United States Barak Obama. In his view, owing to these changes authorities will act together to prevent the formation of bubbles.

“The culture of irresponisibility has deep roots from Wall Street to the rest of America,” the president of the United States forcefully stated. “The current model of financial market regulartion was designed in the wake of the great financial crisis of the 20th century, the Great Depression. They could not withstand the economy of the 21st century, with its speed, size, and sophistication.”

The main idea of Obama’s reforms is that regulations must monitor systemic risks and hold large companies under control, who otherwise might undermine the stability of the financial system and economy.

For that reason the Federal Treasury will create a Council for the Supervision of Financial Service, which will include the Secretary of the Treasury, the Chairmen of the Federal Reserve Board, the FDIC, and the SEC. The council will be able to request information from any financial company.

This greatly increases the powers of the Fed. Under Obama’s plan, it will not only oversee banks, but any companies which  are engaged in various degrees of financial transactions. These companies must provide, at the Federal Reserve’s request, any information about its activities and those of its subsidiaries in the United States and abroad.

Now, the Federal Reserve regulates commercial banks, registered under federal laws, but other banks and savings institutions are regulated by the state, which allows them to choose convenient locations. Also, the administration wishes* to increase the banks’ reserve requirements and limit their ability to take on risks.

Obama’s speech aroused great interest [literally, ’caused great resonance’–I like that turn of phrase] in financial circles. Most commentators are confident that many of the points in Obama’s plan will reduce the profits of financial institutions. In principle, this is logical – a race for greater profits eventually led to a crisis. But will it rectify the situation as the president of the United States suggested [iffy on that sentence]. Well-known financier George Soros tried to answer that question in an article he wrote. He believes that the market is not perfect, and in the state mechanisms of regulation. [There’s more on the end of this sentence, but I’m not sure what it means.]

To some degree, one can agree with Soros. However, I would like to ask a question of the American authorities: who is fit to judge (in the sense of regulators)? The Federal Reserve, which is actively inflating bubbles, buying treasury bonds, and paying for these transactions with unsecured dollars? [Again, not sure about the preceding sentence; this article seems to have increased in difficulty.] This program, by the way, will cost $300 billion.

This is very similar to the situation where one sees the mote in his friend’s eye, but doesn’t notice the beam in his own. Therefore I would like to suggest that the American administration begin reform of regulatory reform regulators.