Wall Street reform vs. financial regulation reform
I spent 2009 and the beginning of 2010 reporting on health-care reform. I talked to a lot of experts and a lot of Hill and administration sources. And they were all pretty much interchangeable. Whether it was George W. Bush's CMS Director Mark McClellan or President Obama's OMB Director Peter Orszag or Ohio Sen. Sherrod Brown or the New America Foundation's Len Nichols, the verdict was always pretty much the same: This is a good bill. It incorporates most of the best cost control ideas and covers most of the uninsured. It makes a lot of concessions to political reality and doesn't go as far as we need it to go (particularly when it comes to moving us past the employer-based system), but it's a worthwhile start.
Financial regulation reform has been just the opposite. The administration and Hill sources I've spoken to have been much more positive on the regulatory proposals than the experts and analysts I've sounded out. Indeed, it's been hard to believe the two sides are looking at the same legislation.
The difference, as far as I can suss it out, appears to be this: A lot of the people examining the bill from afar believe that it doesn't go far enough in reforming Wall Street itself. The financial sector after regulatory reform will look a whole lot like the financial sector before regulatory reform. A lot of the people helping to write the bill see it differently: The regulatory structure will look a lot different after reform than before reform. There will be a body charged with watching systemic risk, and systemically important non-bank entities will be subject to regulation, and derivative bets will (hopefully) be a lot more visible and the Federal Reserve will have a lot more power and information when it needs to break up failed banks.
That difference in what the bill needs to do -- change Wall Street or change the regulation of Wall Street -- is leading to a much more divided elite discussion than we saw during health-care reform. in part, that's because the two sides don't see their interests as aligned. Many people who supported more radical health-care reform proposals saw the Affordable Care Act as a step in their direction. Many people who want more radical reform of Wall Street do not see the proposals on offer as leading to the same endpoint. Regulating this system more effectively is not the first step to changing the sector dramatically.
But as often happens, that distinction is getting confused in the political discussion. The Democratic National Committee's press e-mails have taken to calling this "Wall Street reform." Wall Street reform is what a lot of people would like to see us do. But it's not, as far as they can tell, what we're doing.
Photo credit: Mark Lennihan/AP
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