Bloomberg reports that the Obama administration’s proposals for reforming the way the financial sector is regulated will most likely be put on hold until next year. That’s an almost certain recipe for the already timid proposals to be diminished to the point of uselessness.
The crisis, it seems, really will be wasted.
The excuse given for delaying reform is that the Obama administration is pushing climate and health care reforms, which are expected to take up much of the legislative calendar. We suspect, however, that lawmakers want to push financial reform into 2010 because it’s an election year. Every single member of Congress will be able to hit up the banking sector for campaign donations. So perhaps we should amend that: the crisis might not produce meaningful reform, but it certainly won’t be wasted in terms of generating campaign contributions.
Some reactions from around the web:
Robert Teitelman, The Deal. “What we seem to be heading for is an intensely Balkanized regulatory apparatus attempting to supervise a financial system that has converged even more than before Bear Stearns Cos.’ collapse. Even if the Fed does prove to be an effective systemic regulator — and its record as a regulator is spotty at best — how this council will operate in a crisis is a little scary. Half the folks on this council are currently engaged in desperate attempts to undermine each other, or are fighting over Vikram Pandit’s future or on the oversight of derivatives. Some dislike each other; others simply want to establish bureaucratic dominance. All this will only get worse as Congress, with its cast of intense self-interested characters, swings into action”
Ezra Klein, Washington Post. “Six months ago, it was easy to imagine securing an overwhelming change to the financial regulatory structure. Seemed almost a given, in fact. Today, I’d consider it unlikely. Banks have beaten back cramdown legislation and secured the ability to pay back TARP funds and managed to argue the stress test regulators into reducing the capital they needed to raise. They don’t seem to be losing many battles. And 12 months from now? It’s almost impossible to imagine Congress mustering the energy for a massive fight over financial regulation. Momentum matters for these things.”
Dereck Thomson, The Atlantic. “As we speak, popular resentment toward the banks on Capitol Hill and Main Street is ripe and ready for plucking. A year from now, it will be moldy, smelly and stashed away in the refridgerator compartment where you hide lumpy fruit that didn’t make last week’s fruit salad. In other words, this won’t kill the will for financial reform, but it could turn the will into mush.”
emphasis on health care reform and climate control will likely push bank reform and re-regulation to late 2010, just in time for election-year grandstanding.