This week I would like to talk about the new financial oversight bill that was unveiled not too long ago.
This bill is 1,336 pages long, but is easier to read if you look at this summary http://banking.senate.gov/public/_files/FinancialReformSummary231510FINAL.pdf.
It creates another government organization that makes its own rules and then is also charged with enforcing them; I am wary of organizations that can make whatever rules they want and enforce them with no direct checks to make sure they are doing what was intended.
What they are doing for “Too-Big-To-Fail” sounds like it could be worth something. IF they actually do what they say, it could help the economy greatly, but I am afraid that it’s going to look like Swiss cheese with all the loopholes. I am all for accountability and transparency in the government, but laws fail if they rely on self-report methods for information gathering.
The advanced warning system is a good call, I am just sad that it took a bill to get some common sense into this realm.
I believe the rest of the bill looks good in theory, but I don’t know how it will be in practice, so I am unsure as to what position to take. This is partly due to my lack of knowledge in the realm of financial terms and activities. I did not have time to research them all between last week and this one.
I think my largest problem with the bill is that it is yet another increase in the size and scope of the federal government. My biggest concern is that we end up with a new federal agency, with broad and loose powers, with no oversight to speak of, that will introduce a new set of regulations, which will put an even greater burden on operating companies and small businesses. This will in-turn drive larger companies to move operations outside of the US AND make it more and more difficult for regular people to start their own businesses. My biggest problem with this whole thing is that if it passes, my bet based on previous experience, is that roughly nothing will actually change about how the laws are enforced. A whole ton of the stuff that went down in the banking and housing industry that caused the financial meltdown were already illegal. The problem was that no one was checking up on the companies to make sure they were following the law, and even worse, when regulators would check up on the companies, they wouldn’t enforce the rules.
All I see in this thing is a new set of red tape to bog down American business with no real detracting from the actual causes of the current financial crisis.
The problem with the argument that this will increase the size and scope of the federal government is that no one was saying that when the Department of Homeland Security was created. It suggests that its ok to protect people from threats of terrorism. But not ok to protect people from financial threats. More specifically threats from people who millions of Americans trusted with there money and livelihood. I agree that regulators fell down on the job and that there must be more pressure for them to do there jobs. But I don’t think this will greatly increase the size of government. In fact taking a look at the above link shows that the new bureau will be folded into the Fed Reserve. It will not be completely independent.
This bill is intended to make it more difficult for large financial firms to act in a reckless fashion that will only hurt smaller financial firms and ordinary people. In the after math of this financial crisis we have seen that the largest financial firms have in fact hardly felt the effects. Firms like BOA and Chase have reported 1st Quarter profits in the billions. Yet it’s the average American that is still suffering.
I also think that small businesses wont be any more affected by this than they were before the bill. Larger financial firms will, of course, use this as an excuse to restrict SB loans. But if nothing else this will make it so that fewer people in the country will be affected should another incident like this happen.
Bottom line is that this is a result of a couple of things. A lack of regulator oversight. A lack in responsible financial practices. And a lack of foresight on both the market and government of how these business trends could affect the country. A free market only exists so long as the market exists. Meaning that it’s nice to think that corporations should be allowed to conduct there businesses as they see fit. But that will be of little conscious when millions of people are broke. And the executives are the only ones that can pick up the pieces and move on with no ill effect. I believe this will be a positive thing so long as those involved actually do there jobs. I would like some legislative oversight to keep pressure on all parties to do there jobs.
Actually, a lot of people were saying that when the Department of Homeland Security was created. Most of those people were also outraged by the degradation of civil rights that occurred due to the Patriot Act, which got reinstated again in February! (http://www.politico.com/news/stories/0210/33479.html) But yeah, I agree the major news media kinda just slid over both of those things, but that’s because they weren’t nearly as popular. It’s good business right now to hate on large corporations, because so many Americans are blaming them for the financial crisis.
Don’t get me started on the Federal Reserve. Suffice to say that the Fed basically acts on it’s own accord with very limited oversight from any branch of government. The Fed, I believe, is the largest contributing cause to all the problems we have. They didn’t enforce the rules they made. Now we want to expand their powers? It seems to me that they’ll just shirk those duties as well. I’d rather see a reformation of the Federal Reserve than the introduction of a new agency that will be rolled into the Fed.
The problem is we don’t have a free market system. We’re too scared as a country to have a free market system. Free market systems have recessions, and depressions, and crises. We’re too scared to let those things happen so we regulate the market. Every regulation placed on the market changes the nature of the beast, but no one knows exactly how. From what I’ve seen in other countries that introduce harsher and harsher regulations on business, to try and avoid economic downturns, what occurs is usually hardcore stagnation. No recessions, but no new business either. No start-up businesses. No way for the little guy to be anything but the little guy his whole life. Basically the total crushing of the American dream. Every new regulation that we introduce takes us further and further into that realm. Every time we “clamp down on business” we reduce the ability of every American to change their socio-economic status.