Two sides to the Fed-as-Regulator debate

Lee C. Bollinger, president of Columbia University in New York, says the U.S. needs a "First Amendment for the economy" after a failure of regulation that could be fixed by giving the Fed more responsibility. Bollinger called the economic crisis a “huge failure of public regulation”, and proposed an independent regulator based upon the judicial system which could issue written rulings and change precedents. Bollinger said the Fed had the capacity to stand outside the system as an independent regulator to monitor risk.

On the flip side, Harvard professor and author Amar Bhide says in a WSJ opinion piece that the Fed has done such a terrible job at financial regulation it would be unthinkable to give it more power, and goes so far as to say we should be talking about dismantling the Fed, not increasing its power. Bhide goes on to write that Fed's regulatory mission has become so big as to be unmanageable and proposes a minimum of splitting the monetary policy and regulatory functions of the Fed as was done with the Maastricht Treaty that established the European Central Bank.

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CFTC Chairman Gary Gensler said he believes the agency must seriously consider setting stricter limits on traders who place bets on energy contracts. His remarks are the just the latest example of a shift in tone for the commodities regulator vis a vis trading curbs and other regulatory measures. Gensler went on to say that "every option must be on the table to curb "excessive speculation", which the WSJ called out as politically expedient remarks in its editorial on "The Politics of Speculation". In addition, Goldman Sachs talked its own book by saying attempts to curb speculation may prove "disruptive" to markets.