Is the Fed Still too Close to the Banks that They Regulate?

link here to article

We recently posted an article on the reported profits in the financial sector. This article raises questions about the reported profits and, more importantly, about the priorities of those who are supposed to be regulating the banks. The editorial claims that the reported profits may have been inflated by downward revisions to future losses from bad assets that they hold. Since many of those bad assets are in real estate securities the downward revisions may not accurately reflect bank exposure to loss as housing prices continue to fall, and bank penalties for dealing with foreclosures improperly have not been decided. Allowing banks to pay out dividends, and to buy back stock shares, is a way to reward bank executives and other shareholders. It also reduces the cushion that banks may need if they underestimate future losses and penalties.