It would be mean, and probably unfair, to criticize Treasury Secretary's Geithner's brand-new proposals for derivatives regulation as a classic case of barn-door-closing after the horses, cows, pigs, geese, chickens and even the rats all skedaddled. Better late than never, right? The proposals are sensible and long overdue, and I hope Congress moves quickly to codify them into law.
No doubt: It is absolutely true that "An essential element of reform is the establishment of a comprehensive regulatory framework for over-the-counter derivatives, which under current law are largely excluded or exempted from regulation."
Yes! So bring on the centralized clearing houses for derivatives trading, the increased requirements for transparency, "robust" margins, "conservative" capital levels, and reporting. That would all be good.
But I do hope someone gets Lawrence Summers on the phone and extracts some kind of on-the-record admission that he and Robert Rubin and Bill Clinton and Phil Gramm screwed up royally in 1999 and 2000 when they ensured that these derivatives would not be regulated. Because the obvious interpretation to be drawn from Geithner's new rules is that beating back derivatives regulation 10 years ago was a disastrous mistake. Summers was there, and he blew it. Even Alan Greenspan has admitted he made some errors. How about it, Larry?