by Robert Gary

Created on: February 13, 2009

The Department of Financial Security (DFS) would be modelled on the Department of Homeland Security which gathered about 60 different Agencies and Bureaus together into a single organization. So, this would be the same idea except applied to all financial transactions other than consumer sales or business equipment purchases. Anything having to do with lending, or mortgages, or finance, or stocks, bonds, or derivatives would come under the unified authority of DFS.

DFS would be comprised of the present Securities and Exchange Commission, plus about 50 smaller agencies and commissions that regulate everything from banking insurance, to pensions, annuities, and every sort of credit cards lending and business finance.

The problem with the present arrangement is twofold:

First, it is very expensive, duplicative, and confusing.

Second, it simply does not work. Every time the Federal government sets up a new agency to catch a new kind of swindler, the next generation of swindlers looks for the cracks between the vast array of small agencies, and starts operating in those unregulated zones. Over time, it doesn't get better. The more small agencies are created, the more space is created between their competing jurisdictions. The swindlers have a field day. The only people that actually recognize the swindle-oriented corporations are the short sellers and the hedge funds. Every year they come to Washington, with a list of firms that seem "too good to be true" and they urge the Securities and Exchange Commission (SEC) to do investigations. But SEC is really just an archeologist of business crime, not a true investigator, not a talented detective, not even as good as Inspector Clouseau, or the Keystone Cops.

The short-sellers put their money on the line betting against firms that they know are cooking the books - making the accounting look better than it really is - like Fannie Mae and Freddie Mac the two huge quasi-Federal firms that, along with Countrywide Financial caused most of the mortgage meltdown. If hedge funds and short sellers can figure this sort of thing out two or three years before the SEC, we need to re-organize the system and create something that works.

If we don't, $800 Billion in stimulus money plus a Trillion in Fed funds for mortgage support and bank bailouts will not save us. It may get us through 2009, but unless we have proper regulation of the financial industry, there will be no business environment in 2010.

America used to be the financial capital

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