FinReg passes, bubble-less and crash-less markets await us all
The Senate has passed FinReg by a vote of 60-39, with three Republican helping the Democrats.
The scope of the “reform” is staggering–a 2,000+ page bill, creating some 243 new bureaucratic offices. Like most reform packages to come from Congress, it will hardly be a model of efficiency.
But perhaps the most alarming aspect is the broad, new powers it gives to existing regulators, regulators who should have been minding the store back in the 2000s, when the financial system was ready to implode.
When politicians begin to take notice of an issue, and start whining about “reform” and “action” to be taken, it’s usually too late, and is really just an indication that said politicians have no clue about what they are trying to do.
Such is the case with Wall Street reform. Since the 1930s, with the establishment of the SEC and the creation of our modern financial regulatory state, politicians have deemed themselves the white knights and saviors of bubbles and crashes, wrought by “evil and greedy” Wall Street bankers.
And anyone who actually believes that this is the case, is being extremely ignorant:
This isn’t the first time Congress has expanded the Fed’s role. After the Great Depression, it passed the Employment Act in 1946, charging the Fed with averting the huge unemployment seen in the 1930s. After the double-digit inflation of the 1970s, the Fed was formally given a dual mandate of promoting both price stability and maximum sustainable employment. In the wake of the latest financial crisis, the Fed is effectively being told to add the maintenance of financial stability to its responsibilities.
The risks, however, are that the Fed still won’t be able to prevent another crisis, and that it will be an even clearer target for blame if that occurs. “The bill has good intentions, but I’m worried about its implementation. If I were the Fed, I’d be seriously worried about being left holding the bag,” said Anil Kashyap, a professor at the University of Chicago’s Booth School of Business.
As long as there are free markets, and market participants free to engage in those markets, there will be bubbles and crashes, peaks and troughs–such is the nature of the system.
The problem is and never was lack of regulation–the banking industry is one of the most heavily regulated in the country. It comes down to who is doing the regulating.
When you see Dodd, Frank, Reid, Pelosi, and all the rest up there patting themselves on the back for passing yet more “reform” of the industry, ask yourselves who is the real problem here.