Editorial: Will European Banking Regulators Soon Be Running American Banks?

The recent proposal by the Federal Reserve to assign itself powers to continue to interfere in the free markets provides another reason they seriously need to be reined in, and why, as Ron Paul says, we must “End the Fed.”

Even with their unprecedented grab for more power, there is a growing opposition to their attempts at controlling even more aspects of the diminishing free market.

This time around they’re attempting to be the final authority on how the majority of U.S. banks pay their top workers. Not only do they want the authority to review how the banks pay them, but they also are feeling out if they can have veto power over those decisions as well. Politicians and the banking industry is sharply divided over the issue, and the battle will increase going forward.

The details of the final proposal is being worked on now, and will probably take about a month to finish up. All that has to be done to pass this measure is a supportive vote from the board of the Federal Reserve. At the same time they believe they don’t need any congressional approval to put the plan in place. A number of lawmakers are beginning to question that as news of the plans leak out, and some are wondering out loud whether the Federal Reserve has any authority at all in these matters, as they seem to have just made them up. The constitution actually invests Congress with power concerning our currency, and even though at this time they’ve delegated it to the Federal Reserve, doesn’t mean the Federal Reserve can act like some type of sovereign entity answerable to no one.

So far the terms of the proposal wouldn’t directly be connected to determining individual pay, but would focus on incentives that some assert have been part of the problem of bringing down the industry, which are dubious assertions at best, and in my opinion used to take the blame away from the Federal Reserve, which is directly responsible for the economic crisis we’re now in, through its unwillingness to allow the free market to sort through the poorly run companies and allow them to fail. Their medicine will be worse than the disease, as we’ll find out over the next several years.

This is in reality an artificial problem created by the Federal Reserve in bailing out the banking and auto industry in the first place, and now they believe that entitles them to manage how the industry is run far beyond its purpose. Again, if they hadn’t wrongly bailed out the banks, and the banks hadn’t accepted that bailout money from the taxpayers, there wouldn’t be any so-called “risky incentives,” as those that had taken them wouldn’t be around any longer, and those banks that managed risk the best would be operating at a stronger level and picking up the pieces and going forward.

Anyway, now that this is being brought up, even bankers are divided on it, as some rightly not the Federal Reserve would effectively coming in and telling banks how to run their businesses, while other bankers say it would only harm those that aren’t performing best practices.

What would really happen if these proposals are allowed to go forward, and the Federal Reserve moves in this way, is it’ll be another socialist plan to remove competition out of the marketplace and have everyone practicing what the Federal Reserve wants them to. The bankers applauding this plan are obviously those that aren’t able to compete at a higher level, and so embrace this interference so the competition in compensation will be leveled in order for all banks to have no advantage over the other. In other words, markets will be far less free than than they’ve ever been in America.

One last but extremely important piece of this puzzle is the pressure coming from European regulators, who, along with their U.S. counterparts, are working to coordinate how they all work together so no one country operates in a way that would be more beneficial to the banks in their respective countries. In other words, the U.S. way of doing things, even with the interference of the Federal Reserve, still outperforms the socialists in Europe, and so Europe is pushing this to keep their best employees in their banking systems and not having them flood to American financial institutions.

This is part of what I was talking about when referring to ‘entangling alliances’ recently, where deals are made between central bankers from a number of countries without oversight on the part of American lawmakers towards the Federal Reserve. These alliances are unprecedented, another reason that the Federal Reserve needs to be audited and reined in in the short term and abolished in the long term.

It’s outrageous that European regulators are making deals with the Federal Reserve which level the competition in a socialist manner in order that Europe can compete with America for banking talent because they refuse to move off of their uncompetitive socialist practices.