The regulatory head fake

There are three simple maxims that pretty well encapsulate the economic policies of the Bush Administration.

1. Tax cuts are sacrosanct.
2. Deregulation is always good, no matter the consequences to the consumer or the economy.
3. The freer the market, the better.

So, to anyone hoping for some sort of meaningful reform happening on W’s watch, I have a bridge to sell you. Secretary Paulson is merely trying to conjure the illusion of reform without doing anything to upset, meaning reign in, Wall Street. Because that would be bad.

The upshot of this new plan is that a bunch of regulatory agencies will merge (remember how well the work with FEMA during Katrina?), there will be additional requirements in licensing mortgage brokers, etc., but absolutely nothing in this scheme would prevent another Bear Sterns collapse. And make no mistake; that is the point. This is political chicanery. We are supposed to watch the wand in Paulson’s left hand while the right does nothing at all.