How Treasury's Reform Could Hurt Free Enterprise.

The article focuses on how the U.S. Treasury's bank reform proposals might alter the economic and financial system for the worse. The U.S. Treasury has recently put forth a series of proposals to modernize the financial system. Although the author agrees with the Treasury's stated goal to devise a regulatory environment that will help assure the long-term health of deposit institutions, the author has some differences with their recommendations. Over the last few years of severe financial adjustments, deposit institutions, both commercial banks and thrifts, have experienced great trauma. Some institutions have failed. Many others are still short of capital, have questionable assets, and are experiencing losses. A few commentators assert that deposit institutions as a class of financial intermediary have no future that in some sense they will become financial dinosaurs. Of course, extrapolating trends from the worst decade for banking since the 1930s is bound to produce dour expectations. But that exercise is essentially backward looking.