Head of the Federal Reserve, Janet Yellen, is to testify before Congress today. Ahead of her testimony she says the Fed’s mission is now to “oversee the banking sector” rather than regulate individual banks.
How the authority to regulate financial markets effectively correlates with economic growth, while controlling for inflation, is the question here.
Regulating the Derivative Value
First of all, remember that the banking and insurance sectors, having consolidated with the repeal of Glass-Steagall, to make markets more efficient, became a massive public nuisance!
Yes! Consolidation causes a massive public nuisance, but it derives useful value, and continues to derive that value, in the form of risk (conforming to economic incentives out of desperation), effectively correlated in late order. The risk-value continues to accrue, with almost all new income going to the top 1% income class.
If the objective of its bureaucratic authority is to resist attainment of the nuisance value, what does all income going to the top measure?
Technically, if new income goes to the top, who can reasonably be expected to pay the debt?
What effectively correlates with not paying the debt is financial crises and economic desperation! Like Dodd and Frank said, financial crises will surely happen (and will be well-regulated).
Effectively causing the risk to be avoided must be one of the “remaining problems” the Fed’s head is referring to, isn’t it?