Financial deregulation: too soon or just around the corner?
By Jia Lynn Yang
As my fellow Political Economy denizen Brady Dennis makes clear in this story, it's highly unlikely that Republicans -- if they win big tomorrow -- will be able to repeal Dodd-Frank financial overhaul law altogether. Even just killing off portions, such as the Consumer Financial Protection Agency or the derivatives portion of the bill, would be tough to pull off, too.
But there are changes in the margins that Republicans could still push forward that would benefit Wall Street.
One example: curtailing the independence of the consumer protection agency, according to Jaret Seiberg, senior vice president covering financial services policy at the Washington Research Group.
A Republican majority could try to force the new agency to be run by a board of directors, which would include some bank regulators, much like the Federal Deposit Insurance Corporation, Seiberg suggested.
"Putting in a better system of checks and balances would reassure the markets and reassure the banks that they're not going to deal with overreaching," he said.
Seiberg also thinks that the pendulum could already start swinging back toward deregulation, and a Republican takeover of the House would accelerate this.
Think that's too soon, given that Dodd-Frank is only in the earliest stages of implementation? Seiberg points to what happened soon after the banking crises of the late 1980s and early 1990s. Despite passing a slew of laws that imposed tough capital rules on thrifts and creating the Office of Thrift Supervision, by 1992, Congress had begun easing up on banks. The Housing and Community Development Act of 1992 made changes that pared back some prior rules. Then by 1999, Congress passed the Gramm-Leach-Bliley Act, a landmark bill that allowed banks to conduct investment banking, commercial banking and insurance all under one roof.
This latest era of regulation has included Sarbanes-Oxley, new credit card regulations and Dodd-Frank. "The climate is ripe in 2011 for the start of deregulation," Seiberg wrote in a recent note. He predicts that bold legislation is possible within five to 10 years.
Jia Lynn Yang
| November 1, 2010; 4:08 PM ET
Categories: 2010 Elections, Financial regulation
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