As Washington announced plans to rein in Wall Street’s excesses, the bad news continued to flood out of the United States.
Gross domestic product, that is the total output of goods and services within US borders suffered the steepest quarterly decline in 27 years. In the final three months of last year US GDP fell at an annual rate of 6.3 percent. US companies’ profits also plunged. Depressed by a slump in consumer spending and exports, profits shrank at the fastest pace since 1982. Corporate profits shrank by 10.7 percent compared with the same period a year earlier. At the same time the US government unveiled tough new rules proposed for financial firms. Treasury Secretary Timothy Geithner said they want to simplify things: “We have an enormously complicated system in the US, with regulation on Federal and State level, multiple bank supervisors, multiple authorities, and it just didn’t work. It did not deliver what it has to deliver. And I think we have to start by making sure we have in place effective consultative supervision over those entities that could pose potential risk to the system.” Trying to reduce the excessive risk-taking that nearly wrecked US banks and triggered a worldwide recession the Obama administration wants a new post of risk regulator. That person would have the power to look deep into non-bank financial companies, such as hedge funds and private equity firms.