A backward approach

Wednesday, April 2, 2008 | 2:07 a.m.

Treasury Secretary Henry Paulson’s plan to address the regulation of Wall Street and the mortgage industry received a cool reception Monday, and rightfully so.

The Bush administration has come up with a series of recommendations that would help Wall Street but do nothing for those hurting from the current economic crisis.

For instance, the plan proposes reducing the Securities and Exchange Commission’s oversight in several ways, turning many responsibilities over to industry groups. The “self-regulatory organizations” are highlighted throughout the report, and if the Bush administration were to get its way, such groups would write the regulations and enforce or not enforce them.

The fox-guarding-the-henhouse approach was a major factor in the problems we’re facing today. No one truly oversaw the mortgage industry, much less investment houses such as Bear Stearns. Largely unregulated, the mortgage industry and Wall Street investment companies engorged themselves on the hyperinflated housing market. Predatory lending and risky loans became the order of the day, and the outcome was inevitable a collapsed housing market that continues to send waves through the economy.

On Monday Paulson said the plan had been in the works for a year. Asked how much the current economic problems affected the report’s recommendations, Paulson answered, “Not much.”

Indeed, Paulson’s plan is an attack on government regulation and oversight, the bane of the Bush administration. He said the overhaul of the system was “inevitable,” so the administration is crassly using the crisis as an opportunity to try to further its ideological goals and chip away at independent oversight of the financial services industry.

Barbara Roper of the Consumer Federation of America told USA Today the bottom line is that the plan, by failing to address the regulatory failure, does nothing “meaningful to benefit consumers.”

Paulson says his plan is aimed at the long term, but the nation needs help now. Congress should do what the administration won’t: help the millions of people suffering from this crisis and rein in the financial services industry.