The New York Times has an editorial excoriating the Obama administration for deregulating foreign currency swaps:

A loophole in the law — which the bankers and their friends, including the administration, fought for — allows the Treasury secretary to exempt the instruments. The arguments in favor of exemption, beyond a desire to please the banks, were always unconvincing. They still are. The Treasury Department has asserted that the exempted market is not as risky as other derivatives markets, and therefore does not need full regulation.

That claim has been disputed by research, but even if it were true, it would be a weak argument. For instruments to be relatively safer than the derivatives that blew up in the crisis, necessitating huge bailouts, hardly makes them safe. Worse, dealers could probably find ways to manipulate the exempted transactions so as to hedge and speculate in ways that the law is intended to regulate.

……

The department has also said that because the market works well today, new rules could actually increase instability. That is perhaps the worst argument of all. It validates the antiregulatory ethos that led to the crisis and still threatens to block reform.

The Treasury’s plan will be open for comment for 30 days. Count us opposed.

(emphasis mine)

There can be a fine line between regulatory capture and corruption, and I am not sure on which side this falls.

In a way, this is worse than Bush and His Evil Minions^™, because W was (correctly) perceived as a radical, but the actions of “Team Geithner” now firmly entrenched this thinking on both sides of the aisle.

H/t Paul Krugman for the graph pr0n.