Treasury Plan: Short Housing and Insurance

At an admittedly cursory first read, my initial reaction to the Treasury plan to save us all from financial markets is to short housing and insurance. Those are the two main areas that will a new and heavier regulatory burden.

Housing is proposed to be subject to a new Mortgage Origination Commission. Because markets are so awful, and companies can’t decide whether to enter the mortgage business themselves, we now are apparently going to have the MOC deciding whether states are up to snuff with respect to the certifying companies permitted to enter the mortgage origination business. Gagh. Kill me.

And then there’s insurance. There Paulson proposes new federal regulation of that stodgy business by creating a new national insurance office within Treasury, one that would oversee any insurance firms so dumb as to choose to have a federal charter.


  1. I was afraid of something like this happening.
    I’m usually a firm believer that markets should be allowed to resolve things out (and this way, people also learn their lessons when they do stupid things).
    But the thing is, governments never let the markets really do what they must. UK bails Northern Rock with their Fabian-esque socialism that they call capitalism; we follow suit in bailing Bear Stearns. The only difference is that we put on a facade where Paulson would call up Dimon to do the “needful”.
    And what do they do after butting their collective noses and “saving the market”? That’s right, they regulate some more.
    Eh. Wonder why they even bother with the facade.

  2. “But the thing is, governments never let the markets really do what they must.”
    Exactly, knowing tha,t what is the right structure? It’s not the Paulson Plan, the initial selling point of which is it will beat the hell out of a Frank/Reid/Pelosi POS bill. But what was the move? Shut the housing market down for a breather in 2005? Raise capital reqs? Drop a hammer on RE spec, accredited investor status wise?

  3. And the Chinese do the one thing that will actually prevent recurring mega-bubbles: dramatically increasing reserve requirements. The rest of the proposed regulations there also demonstrated a much lighter touch and better appreciation for cause and effect than anything being proposed in the US. Curiouser and curiouser.