The Need for Speed on Reform
I think it's safe to say that the reaction to the White House's financial regulatory reform proposal was cautiously positive. It's not the root-and-branch restructuring that some wanted. But it covers the basics (leverage, systemic risk, derivatives) and offers a few welcome additions (the Consumer Financial Protection Agency).
But is anyone actually sanguine about it being made law?
Word is that Congress won't really begin considering these reforms until the end of summer or the beginning of fall. That means they're not likely to come to the floor until the end of the year or quite near it. That means banks and other affected companies will have months to organize against the provisions they consider most onerous. That means the economy will have time to grow a bit, and the terror following Lehman's collapse will have receded from our memories, and the financial sector and the politicians who protect it will be able to argue against shackling a growing economy with new regulations without being laughed out of the Congress.
I understand the impulse to do this right. To wait until the crisis had calmed and our minds were a bit clearer. And it's not as if the administration's economic team has had a lot of spare time in the past few months. But having watched the banks beat back "cramdown" legislation, and having watched the troubled companies slip out of TARP, and seeing that Republicans are already assailing stimulus, it's hard to be confident that the political system has the will to pass something as intricate and vulnerable to lobbying as regulatory reform. There are certain things that you want Congress to have time to consider and craft. And though it's sad to say, there are certain things you want rushed through the body fast enough that partisanship, lobbyists and electoral incentives can't keep up. I worry that financial regulation is one of those things.
Posted by: TheIncidentalEconomist | June 18, 2009 8:46 AM | Report abuse
Posted by: TheEpicureanDealmaker | June 18, 2009 9:10 AM | Report abuse
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