January 24, 2010
Regulatory Reform Scorecard
I am somewhat chagrined that, over 17 months since the news first broke that the global financial system almost dematerialized, there is still no meaningful domestic regulatory reform. Here's a quick status report:
The House of Representatives passed a Bill in December (H.R. 4173) that, among other things, would rein in some of the unregulated derivative products blamed for billions in losses and establish a new consumer protection agency to deter unsavory mortgage practices. That Bill would also create a private cause of action for investors harmed by the gross negligence of credit rating agencies (whom Professor Coffee of Columbia Law School fears may be sued out of existence). To address systemic risk, H.R. 4173 would also create an oversight council including agents from entities that failed to identify systemic risk in the years 2004-2008.
The Senate has yet to take up the Bill, but is rumored to be dropping the proposed consumer agency as a concession to Republicans (especially since the Banking Chair has announced that he's not seeking re-election).
Meanwhile, a bipartisan Congressional Commission is taking testimony from bank chiefs and regulators alike as part of a formal inquiry expected to last until December. That Commission is authorized to subpoena documents and make criminal referrals.
Separately, the SEC (which is seeking self-funding to counter its annual budgetary obstacles and staffing shortages) is lobbying for the authority to register thousands of hedge funds (to add to the roughly 30,000 entities presently registered with the Commission) (I'm not embellishing -see Chair Schapiro's House testimony from March 2009 at this URL: http://www.sec.gov/news/testimony/2009/ts031109mls.htm ).
The Federal Reserve Chairman is embroiled in a contentious renomination while being forced to defend Fed monetary policy from 2002-2006 (see his January 3rd speech in Atlanta at http://www.federalreserve.gov/newsevents/speech/bernanke20100103a.htm). Separately, the Chairman is lobbying for a humble "role" for the Fed in supervising banks going forward while acknowledging that "the Federal Reserve cannot and should not be responsible for oversight of the financial system as a whole" (see the January 13, 2010 letter to Senate Committee on Banking at http://www.federalreserve.gov/BoardDocs/RptCongress/supervision/supervision_report.pdf ).
And the President is expected next month to unveil a budget that will make up for TARP program shortfalls with a 10-year tax on very large banks. Or individual securities transactions. Or Wall Street profits. Or any/some/all of the above.
Making me realize: When I watch various government officials randomly blaming the various market meltdown culprits, I am somewhat encouraged that, over 17 months since the news first broke that the global financial system almost dematerialized, there is still no meaningful domestic regulatory reform....
January 24, 2010 | Permalink