Congress, the Fed and the bail-out bill | Someone to watch over me | The Economist

Congress, the Fed and the bail-out bill | Someone to watch over me | The Economist: "Someone to watch over me

Oct 9th 2008 | WASHINGTON, DC
From The Economist print edition
The bail-out law brings more oversight of the Fed and the financial system

THE 451-page bail-out bill passed by Congress on October 3rd contained reams of extraneous stuff, ranging from $150 billion in tax breaks to increased insurance cover for mental illness. No surprise there. It also includes two little-noticed provisions that portend closer oversight of the financial system and of its single biggest player, the Federal Reserve.

The law orders up two reports on regulatory overhaul. The first, by a congressional panel created to monitor exactly how the Treasury is to spend up to $700 billion on mortgage assets and stakes in financial companies, is due by January 20th 2009, the date of the next president’s inauguration. The second, to be written by the next treasury secretary, is due on April 30th.

Although the law does not exactly prejudge the outcome, it’s a safe bet that it does not envision less regulation and freer markets. The reports, the law says, must determine whether anything that is not now regulated, such as over-the-counter swaps, should “become subject to the regulatory system”, and whether there are “gaps” in c"