by Harvey Pitt Info
Harvey Pitt, a former chairman of the SEC, is the Chief Executive Officer of Kalorama Partners, LLC.
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Richard Drew / AP Photo The financial-reform bill that hits the president’s desk this week is a 2,500-page failure that will only create more problems for federal regulators, argues former SEC Chairman Harvey L. Pitt.
Later this week, the president will sign the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the entire country will witness a “Thalidomide” moment—that special time immediately following a terrible crisis when our elected political leaders, summoning all the self-laudatory instincts they possess, pronounce the latest “crisis” solved by dint of legislative fiat. Dodd-Frank will be our second such financial crisis/Thalidomide event since the new millennium, having been preceded by Sarbanes-Oxley just eight years ago.
We’re about to receive legislation that could better be entitled “The Lawyers’ and Lobbyists’ Full Employment Act.”
As it was with Sarbanes-Oxley, we’ll be told that our last economic crisis was someone else’s fault (but never Congress’) and all we really need is a hefty dose of legislative medicine. And “hefty” doesn’t even begin to describe this dose of legislation. In 2,500 pages of dense prose, we’re about to receive legislation that could better be entitled “The Lawyers’ and Lobbyists’ Full Employment Act.” Which begs the question, what’s the likely impact of Dodd-Frank?
• Christopher Chabris and Daniel Simons: Why Financial Reform Will Fail Here’s a scorecard for your consideration:
• Dodd-Frank is a ponderous beast. If Congress were paid by the word or the page, this verbiage might be understandable. But neither of those conditions exists, meaning all we can be certain of is that no one in Congress or the administration has actually read the entire bill.
• Who actually knows what’s in the bill? Passing legislation without understanding its contents is akin to allowing inmates to run the asylum. Only congressional staffers and paid lobbyists know what’s in the bill, and perhaps only specific provisions. In a bill this large, dealing with subjects this complex, all the rest of us know are the sound bites prepared by the shepherding committees.
• The legislation teems with unintended consequences. A case in point is the provision requiring the SEC to establish an investor advocate. Putting to one side the fact that this is the SEC’s mandate, this provision unleashes an SEC adversary—someone who must express unfiltered judgments on the job performance of everyone else at the agency, including the five commissioners, giving this person an unlimited budget and allowing this person to hire outside counsel to sue the SEC or FINRA, if he or she disagrees with their actions!
• The bill sets the SEC up for failure. The SEC is given more rulemaking, more studies and more onerous responsibilities than any other financial regulatory body. Worse, the SEC must now regulate 10,000 hedge funds and several thousand private-equity firms, but was denied what many other financial regulators have—the ability to self-fund its operations. The SEC presumably was denied this authority because the members of its Appropriations Committees don’t want to jeopardize campaign contributions from those the SEC regulates. In particular, the SEC won’t be able to inspect tens of thousands of new firms it will oversee—or pay to get the kind of expertise to compete with the private sector.
• The bill doesn’t do what it set out to accomplish. The most important goal of this bill was to fix the regulatory regime that permitted—and even fostered—the last crisis. Viewed from that prism, the ugly truth is this bill will make our system more vulnerable, not less. What was, and is still needed, is a regulatory regime with better flexibility that is more nimble, and able to spot potentially damaging trends before those trends become full-blown crises. Instead, what we have is a bill that makes government less nimble, and more ponderous. The systemic regulator—the FSOC—can override decisions of individual regulators. The Consumer Financial Protection Agency can bog down any other agency by encumbering agency rules or policies. And worst of all, the bill doesn’t provide the transparency so desperately needed for new products, new services, and new activities. In short, the bill addresses last year’s crisis, but does nothing to prevent the next crisis we’ll surely confront in short order.
In other words: Congress has labored mightily, and brought forth a mouse!
Harvey Pitt, a former chairman of the SEC, is the chief executive officer of Kalorama Partners, LLC.
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God I read that whole thing then looked at his credentials. He works for a firm, no surprise. And the biggest complaint seems to be the fact that the SEC and wall street is probably going to have to hire more people.
This article seems to be more a... gov doesn't work, can't work. so why bother trying missmash which seem to charge that the bill does to much AND to little simultaneously. This type of attack leads me to believe the goal of the writer is not to push for any real reforms. If he did he would attack the political climate which makes better legislation difficult to draft or pass.
flf....the man is saying that this bill is all pomp and no circumstance. You can applaud as congress and the Obama team walk the red carpet but where is the real reform here? The republicans and Wall Street execs are giggling.
"A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murderer is less to fear. The traitor is the plague." "The terrorists are the lest of our problems"
alloypony... Is that a quote? If not, nice wording.. If so, a citation would be in order. Either way, the sentiment is precisely what I am thinking. Reagan's 'bad government' shtick and 'trickle-down- economics opened a Pandora's box of traitors to America. Security and prosperity to America has 3 parts in my opinion. Military, of course... Manned by passionate young people and commanded by self-disciplined individuals committed to America. Education... Doing the best it can. There are a few dummies and lazy teachers but for the most part they love America. And..... Wealth managers... This is an 'every man for himself' grab fest. Cheat, lie and steal are the orders of the day, and America can go to hell, especially if it expects them to be loyal. Here are our traitors. They use American tax-funded infrastructure, American's personally funded education and the lives of Americas childre to protect its assets. And yet, their only goal is personal wealth. They Close factories, steal pension plans, out-source work, manipulate markets and threaten us with too-big-to-fail scenarios when they get caught. They take no personal risk. When they fail, they just take their golden parachute and float off while the rest of us go down in flames. Even if they are prosecuted, their billions in off-shore wealth is theirs to keep.
@alloypony quote marcus, much?
This seems to be nothing more than a set of Fox News talking points.
You think?
AlanD2 Get a new phrase other than "Fox News talking points". You've said it a thousand times and it has no impact.
Well, it impacts you, Holly, or you wouldn't be complaining.
all i get out of this is the delicious irony of the title, "dodd-frank wall street reform and consumer protection act." everybody bend over and grab your heels cause this consumer protection will be consummated by the foxes in the hen house. enjoy...................
Well, under Mr. Pitt governmnet didn't work since the SEC under his watch couldn't even catch Bernie Madoff, and let all kinds of fraud and crooked speculation get out of control. Don't get me wrong, I know that Dems like Frank and Dodd are all on the take, too, but the Republicans like Pitt and the rest are no better.
LOL! I saw that, too. And, the GE ad next to it. XD
This story begs the question: Where was the SEC under Chris Cox's tenure and all this malfeasance was taking place? And secondly, why did the stock market go up again for the seventh straight day knowing full well that finreg was going to pass? The financial sector of our economy proved that it cannot regulate itself. Regulation rears it's ugly head when these sorts of things happen. Not to worry, once the regs are in place, the moneyed gentry will find a way to make a buck, hopefully not at the expense of the rest of us. We must find a way to create a marketplace that's a win-win for everyone.
Both Wall Street and Washington have one thing in common. Their success depends upon a lack of transparency.
How can one dismiss the damnation of the Bill by a FORMER CHARIMAN OF THE SEC because he got a job after he left office? Any bill that did not break up the big banks is a sham.
to submarinemn.... you cant break up the Big Banks the way you might imagine..... to do so would make it impossible for them to compete in a Global Market.
Bad logic. The Big Banks need to be broken up for the very reason that they would have themselves were they not to have been saved. The government just helped them die in a way that didn't set off the domino effect that would have taken the whole country down. That the smaller banks would not be able to compete is just testament to the fact that Americans can't really compete on the open market - and that they will get beat by Chinese and European banks - i.e. communist and socialist models are superior to bold-faced capitalism. So you - a hare core right winger - take the classical hypocritical position and implicitly advocate the continued government bailout and 'bank welfare' for the nations wealthiest for some other business objective - thereby supporting what is really a socialist model - a government subsidized banking industry.
Rev, i thought you conservatives hated the global markets which obama was getting us into.
to jomamas..... BIG Banks have BIG Money on reserve to do BIG Things.... and no I don't support more BIG Bailouts... but I also don't support BIG Mistakes like you suggest that would transform our country's viability in world markets to that of a "small time player". to bigvic.... why is it you only know how to talk out of your ass?
The Dodd/Frank bill, just like everything else this administration has signed in to law, will be heralded as a great accomplishment by the president in front of cameras..... However, just like Obamacare,,,once the damn bill is read most people will be in agreement when they say, "it ain't worth the time it took to type it". I'm sick of hearing the democrats on The Hill say there wasn't enough time to address Fannie and Freddie in the bill........ It's because of the majorities refusal to attack those 2 dinosaurs the resulting bill has no real teeth.
Have you read they bill, or just talking wind as usual?
jomamas, you won't even understand it if you read over and over again.
Actually, the more people learn about the health care bill the more they like it. If anything they wish the public option had been included.
Really? Not according to a new CBS poll. 49% disapprove 36% approve and by a 3-1 margin think that the bill will hurt them more than help them? And you know that CBS is such a conservatively biased organization. http://www.cbsnews.com/stories/2010/07/13/opinion/polls/main6675137.shtm l
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