Mere days after passing health care reform, Democrats are declaring that financial regulatory reform
will be their new top legislative priority
Senator Chris Dodd has already put forward a reform bill
, which was
swiftly passed by the Senate Banking Committee. But, just like health care, this reform campaign will
not be easy. Here are the policy and political challenges ahead.
- What Dodd Is Proposing The New York Times' Sewell Chan lays it out.
"Described as the most sweeping change in financial rules since the
Depression, the legislation would create a council to detect and avert
systemic risks to the financial system; expand the Federal Reserve's
oversight over the largest and most interconnected financial companies;
create a consumer financial protection agency to regulate mortgages and
credit cards; and regulate many of the over-the-counter derivatives
that amplified the risk-taking that brought about the 2008 financial
- The Ambitious Timeline 24/7 Wall Street's Douglas McIntyre projects,
"The target for financial reform is now being set within the next
month, presumably meaning a passage goal of April or by Memorial Day.
The target is definitely that the new legislation can be sent to
President Obama before Congress adjourns for the year. Maybe early May."
- How This Is Different from Health Care The Times' Sewell Chan notes
that this political battle is going to be very different from health
care in one big way. "In contrast to the economic stimulus and the
health care overhaul, where the White House outlined broad goals but
largely left it to Congress to shape the legislation, the
administration has been intensely engaged in drafting the legislation."
- Congress Must Address 'Volcker Rule' EconoBlogger Mike Konczal thinks
Congress is trying to weasel its way out of deciding on behalf of or
against the so-called Volcker Rule. "It's almost like the one rule
that's a clear rule, that would structurally change the industry in
some way....it's like Congress doesn't want a vote on it. They'd rather
kick it to someone else to deal with." The rule would restrict banks from proprietary trading.
- Why I'm Pessimistic Mother Jones' Kevin Drum isn't hopeful.
"We have a House bill that at least has the right idea, even if it
probably isn't either broad or deep enough. We have a Senate bill that,
even before it goes through the legislative meatgrinder, is woefully
inadequate. And we still have months and months of negotiations to get
through, all of it done in the shadow of a massive lobbying campaign
from every financial institution in the country to water things down
- Enforcing Regulations Tougher Than Passing Them Economist's View blogger Mark Thoma worries
that even if it passes, they won't enforce. "That is, when the time
comes to actually implement this policy and use the resolution
authority, will the government actually do it, or will fears of what
might happen to the financial system lead government regulators to the
more familiar route of bank bailouts? I think this is a real problem."
address TBTF concerns, the bill is relying very heavily on resolution
authority, as opposed to measures limiting firm size or leverage or
interconnectedness through direct means or the use of strong
incentives. So you ensure that some firms will be really big and
systemically risky, and then you give regulators discretion to use or
not use resolution authority. Discretion, under these circumstances, is
exactly what you don't want. It creates doubt in markets that
regulators will actually pull the trigger, which will lead to greater
risktaking by firms, which will make it more difficult for regulators
to pull the trigger in times of crisis.
Want to add to this story? Let us know in comments
or send an email to the author at
mfisher at theatlantic dot com.
You can share ideas for stories on the Open Wire.