Too big for shallow debate

Thursday  the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 passed the Senate and soon will be signed into law. The reaction has been mixed as you might suspect but the bigger issue seems to be the same stale rhetoric is being used even after all we have been through.

It is understandable that certain interests would be for it and against it. And powerful interests who would be most affected by it would lobby legislators to moderate that impact.

But the various camps are still playing it up in the most superficial analysis of greedy Wall Street firms vs. Main Street or out of control government vs. innovative business leaders who create jobs.

People on the right are pretending that we didn’t face a crisis of enormous proportions that caused credit markets to seize up and people on the left seem to confuse social policy with sound regulation. And everyone should be banned from the Wall Street vs. Main Street cliché.

 WE know one thing for sure: the institutions that rely on our free market principles to earn profits needed to be bailed out because they grew too big and to interconnected to fail. And it is debatable as to whether the “too big to fail” dilemma has been adequately resolved.

One critic of the legislation, former FDIC Chairman Bill Isaac, has put forward a possible solution to the too big to fail dilemma. It isn’t part of the legislation but is worth the read. He has criticized both sides of the debate and points out the reality that if one of the major investment banking institutions gets in trouble, they will still be bailed out.

What I like about Isaac’s idea is that it addresses a specific problem. The legislation is more than 2,000 pages and addresses many things unrelated to the crisis. It even establishes “New Offices of Minority and Women Inclusion at the federal financial agencies. That  may  be a good thing and I understand that superfluous amendments are part of the legislative sausage making process but seeing that this was brought on by a crisis that could have risen to the proportion of the Great Depression (and still could) a little better focus by legislators would have been nice.

Perhaps that will be the job of the regulators who will write the rules applying the legislative mandates. A good deal of the serious reaction to the legislation points out that how financial reform eventually plays out will depend on that.

About the Author
Daniel P. Collins

Editor-in-Chief of Futures Magazine, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board of Trade and Chicago Mercantile Exchange. Dan joined Futures in 2001 and in 2005 he was promoted to Managing Editor, responsible for overseeing all the content that went into Futures and Dan’s incisive reporting and no-holds barred commentary places him among the most recognized national media figures covering futures, derivative trading and alternative investments.

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