Thought Theater

Former Federal Reserve chairman Paul Volker appeared on the Charlie Rose show last evening to discuss the recent actions to bailout Bear Stearns. Volker points out that the actions were unprecedented and he cautions that doing so may be an argument for greater regulation of investment houses like Stearns.

Volker's remarks were focused on his concern that we are witnessing a transformation in the financial market. As such, he argues that it is time to review the mechanisms we have in place to insure that the economy is being protected from the bad decisions of these newly emerging financial players.

Volker doesn't believe that the Federal Reserve should play a larger part in the regulatory process; rather he contends that they were forced to step into the void with regards to Bear Stearns. Volker suggests that the regulatory process should originate with our elected representatives.

The problem with that equation (even though I agree with Volker) is that the influence of the players in the financial market is daunting...and nothing provides better evidence of this influence than the recent rewriting of bankruptcy laws making it far more difficult for individuals to walk away from debt. Unfortunately, it appears that our government is on the precipice of bailing out the same financial institutions that sought to limit the options for relief by financially strapped citizens.

Yes, the GOP likes to be seen as opposing handouts and welfare...except when it is directed to those corporations that ante up each election cycle. The welfare reform enacted under the Clinton administration was one of the first steps in this shift towards escalating corporate welfare. If this trend continues, be prepared for further financial calamities of greater proportion...with astronomically more acute consequences.