Financial Regulation

"The center of the financial world has moved from Wall Street to…the Treasury Department."

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A major reason the financial reform bill passed was that Democrats and a handful of moderate Republicans felt the need to do something, anything to show that Washington could stand up to Wall Street. But as I've argued before, few legislators really understood the industry they set out to change, or what problem they were really trying to solve. The result was a bill that, according to one former FDIC chairman, contains "nothing" that "would have prevented the previous crisis"—the crisis that legislators were ostensibly responding to with the law.  

I have the power!

In other words, in authoring the bill, legislators knew they wanted to do something—but never really figured out exactly what they wanted to do. But now it's the law. And that means it's up to regulators to figure out what it all really means.

In the near term, long nights will continue as lawyers attempt to answer a barrage of questions by issuing client advisories, hosting Webinars and taking phone calls. But more significant, industry leaders say, will be the shift of power that occurs as regulators flesh out the guts of the legislation during a multi-year rulemaking process.

"The center of the financial world has moved from Wall Street to 15th & Pennsylvania—the Treasury Department. That's not going to be lost on clients," said Richard M. Alexander, managing partner at Arnold & Porter.

…Though the overhaul weighed in at more than 2,300 pages, experts estimate that only about a fourth of its provisions are set in stone. Even key details about some of its most significant provisions, including the newly created Consumer Financial Protection Bureau and the controversial Volcker Rule, were left largely up to regulatory agencies.

For regulators in Washington, this is a He-Man moment: They get to life thousands of pages of legislation above their heads and declare, "I have the power!" The trouble seems to be figuring out what to do with that power once they have it.

It's not just financial regulators, eith

I have the power!

er. There are some similarities here to the health care bill, which kicks a host of implementation decisions to regulators. We've already seen insurance commissioners fumbling over how to determine if an insurance company is making too much profit, and which insurer expenditures constitute clinical services. And now those regulators are starting the process of determining which health benefits will be designated as "essential health benefits"—a process that's also likely to prove difficult:

On September 23, the reform law will eliminate annual limits on "essential health benefits." But without a regulation on what counts as an "essential health benefit" in sight, insurance commissioners are skittish over what will or won't make the cut—or how they'll make that decision themselves. "That's the problem we're going to have," Josh Goldberg, health policy analyst at NAIC, said at last week's conference. "Beginning on Sept. 23, we're going to have make a judgment of what essential benefits are."

What we're seeing with both of these bills is a massive shift in authority away from the private sector. For both Wall Street and the health care industry, the locus of control is, increasingly, in the halls of Washington bureaucracies.

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  1. In a similar vain.

    y Karen Mracek and Thomas Beaumont, Des Moines Register
    Goldman Sachs sent $4.3 billion in federal tax money to 32 entities, including many overseas banks, hedge funds and pensions, according to information made public Friday night.

    Goldman Sachs disclosed the list of companies to the Senate Finance Committee after a threat of subpoena from Sen. Chuck Grassley, R-Ia.

    Asked the significance of the list, Grassley said, “I hope it’s as simple as taxpayers deserve to know what happened to their money.”

    He added, “We thought originally we were bailing out AIG. Then later on … we learned that the money flowed through AIG to a few big banks, and now we know that the money went from these few big banks to dozens of financial institutions all around the world.”

    http://www.usatoday.com/money/…..cash_N.htm

    1. Wow, complex interrelationships in a sophisticated global market. What a surprise…

      I guess what’s not surprising is that this is surprising to Grassley (or any politician/bureaucrat)

    2. So… the government gave away free money and they’re surprised as to how it got spent.

  2. Lost decade, here we come.

    1. In Michigan, we’re starting on The Lost Decade II

  3. We’re so fucked.

  4. Then later on … we learned that the money flowed through AIG to a few big banks

    Yet another I Am Stupid moment from Congress. Who the fuck do you think made those bets that sank AIG, Joe and Jane investor? Retards…

  5. The Goldman “disclosure” comes as a surprise to no one who was paying attention to the bailout.

    Of course the AIG money went to pay off the insurance claims on the derivatives insurance AIG had sold.

    Of course, many of those claimants were overseas.

    I thought this was already common knowledge. The AIG bailout was essentially a money-laundering operation, a way for the feds to use tax money to subsidize big financial institutions worldwide.

    For teh children, doncha know.

    1. If they didn’t save those banks, the galactic economy would have burned like attack ships on fire off the shoulder of Orion.

  6. I give Obama and Team D 8 months to create a new cabinet-level Department of Credit to manage this abomination. We’re so fucked.

    1. The Department of Homeland Securities Exchange?

  7. They forgot about Fannie and Freddie.

    1. They didn’t forget, Suki, it’s that their pals are running them.

      1. The name says it all: “Dodd-Frank Wall Street Reform and Consumer Protection Act.”

        http://online.wsj.com/article/…..85632.html

        http://www.taxfoundation.org/blog/show/23617.html

    2. Just so. With the Right People in charge, there’s no need for rules.

      1. Oh yea, sort of forgot about that. So their exemption from oversight is a feature not a bug?

  8. “Never steal anything small.”

  9. There’s only one solution that will fix the underlying cause. Problem is, nobody outside of the libertarians really wants to take on the Fed. Instead, they’re giving the Fed even more power than before, even though the ridiculously low interest rates Greenspan was offering is at the root of this whole disaster. Wall Street, the GSEs, and everybody else were just taking advantage of the situation that the Fed created. There’s plenty of fraud and criminality to prosecute there, but that won’t solve the inherent problem with the system.

    Most people don’t even know that Mises predicted the Great Depression the decade before. He did so primarily because of the vast credit expansion of the 20’s. We’re repeating history and learning absolutely nothing from it, nothing at all.

    1. Most people don’t even know that Mises predicted the Great Depression the decade before.

      Do you have a cite for that?

      1. I originally read it in an essay by Rothbard in the collection “The Austrian Theory of the Trade Cycle”. Makes for good bathroom reading.

        But here is a link to a current article on WSJ http://online.wsj.com/article/…..79692.html

  10. I give Obama and Team D 8 months to create a new cabinet-level Department of Credit to manage this abomination. ,/i.

    The Treasury will be re-christened: all hail the Ministry of Plenty.

  11. Sometimes I forget to hold the “shift” key down.

    1. Is that a reference to masturbation?

      1. If it’s not, it should be

        1. I’m taking my talents to the shift key

  12. [Grassley] added, “We thought originally we were bailing out AIG. Then later on … we learned that the money flowed through AIG to a few big banks, and now we know that the money went from these few big banks to dozens of financial institutions all around the world.”

    A guy this stupid should be mowing lawns or sweeping hallways for a living.

    1. Not with a power mower, however. I don’t want that kind of stupid using power tools…

      1. Perfect candidate for an idiot stick.

        1. Grassley for VP

  13. “The center of the financial world has moved from Wall Street to 15th & Pennsylvania?the Treasury Department”

    Don’t worry this is only a temporary problem as the center will soon be moving out of the US.

  14. The result was a bill that, according to one former FDIC chairman, contains “nothing” that “would have prevented the previous crisis”?the crisis that legislators were ostensibly responding to with the law.

    Clearly, Suderman, you have no understanding of power.

  15. Isn’t this all a pointless show anyway? Didn’t Congress already delegate its legislative powers to regulatory agencies? Wouldn’t the SEC have the ability to arrogate these powers (whatever they may be) to themselves by regulatory diktat?

  16. The trouble seems to be figuring out what to do with that power once they have it.

    Oh, I’m pretty sure it will be no trouble for them. And that it will involve a good ass-fucking of The People?.

  17. For regulators in Washington, this is a He-Man moment: They get to life thousands of pages of legislation above their heads and declare, “I have the power!” The trouble seems to be figuring out what to do with that power once they have it.

    Garnering power is like taking that fancy, but complicated piece of equipment from the workplace: You acquire it first, then figure out what to do with it.

  18. It used to be a Profit and LOSS system.
    Can’t let Fannie, Freddie, FHA fail
    Can’t let AIG fail
    Can’t let Goldman fail.
    Pretty apparent they can’t let GM fail.
    Very shortly, can’t let any blue cross fail.
    and so it goes, until every priviate entitiy has the same flaw of government – it can never end, no matter how stupidly run.

    1. Was Lehman Brothers too stupid or not stupid enough?
      or too stupid to be well connected?

  19. What we’re seeing with both of these bills is a massive shift in authority away from the private sector. For both Wall Street and the health care industry, the locus of control is, increasingly, in the halls of Washington bureaucracies.

    Who can count on huge pay raises when they leave the government in 1-2 years and go to work lobbying their former co-workers for the folks they used to regulate.

  20. I know Senators like Rick Santorum would’ve fought like hell to stop this kind of stuff.

    But he was against gay relationships and marijuana scented kiddie porn, so it’s all good.

    And I’m not sure what Sarah Palin thinks of all this, but she may be in…a…church…right…now. Scary!

    So yeah, Che shirts for all!

    _______________
    What we’re seeing with both of these bills is a massive shift in authority away from the private sector. For both Wall Street and the health care industry, the locus of control is, increasingly, in the halls of Washington bureaucracies.

    1. Like he fought against the Medicare expansion act?

      “Jul 7, 2003: This bill passed in the Senate with changes by Unanimous Consent.

      Bold added for dipshit TEAM RED asshole troll.

  21. But this time we have Leaders With Plans! Nothing could go wrong now…

    1. I’m ready to experiment with Leaders Sans Plans.

      1. Plans Sans Leaders would be the better way to go.

      2. I’m up for giving Leaderless and Planless a go. Can’t be any worse.

        1. Here’s your man without a plan.

          http://latimesblogs.latimes.co…..-plan.html

    2. few legislators really understood the industry they set out to change, or what problem they were really trying to solve.

      But why would that get in the way of a good plan 🙂

      Maybe having served in a business should be a prerequisite to serving in Congress…sort of like the minimum age limitation for running for president?

  22. Good bye rule of law, hello rule of man.

    1. Goodbye Age of Man…Hello Age of Orc!

      1. I see we watched the same channel last night.

    2. This. It is, um, interesting how much legislation these days involves providing additional power to existing officials or creating new positions/bureaus: essentially “let this guy figure something out”. 8-(

  23. and so it goes, until every priviate entitiy has the same flaw of government – it can never end, no matter how stupidly run.

    Just the other day, I was thinking about travel agents, and how all their livelihoods were destroyed by internet comparison shopping. It’s a damn tragedy, is what it is.

    Somebody oughtta do something about it; Congress should make it illegal to buy airplane tickets over the internet.

  24. I’m ready to experiment with Leaders Sans Plans.

    Bring on the sans culottes.

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