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Whatever Happened to Financial Regulatory Reform?

Posted by Larry Doyle on September 14, 2009 7:18 AM |

Whatever happened to the grand plans to implement real financial regulatory reform? Has Wall Street received the proverbial ‘get out of jail free card?’ Has our media been an unwitting enabler of lax regulatory oversight and limited transparency? Has Washington once again been ‘bought’ by Wall Street?

In my opinion, America continues to remain at real risk because the answers to all of the above questions is a resounding “Yes!!”

The Obama administration, in the persons of Tim Geithner, Joe Biden, and Larry Summers, is consistently declaring victory in the battle to ‘rescue’ the economy. The fact is, victory is not assured nor will it be enduring when the mechanisms which detonated our nation’s economy largely remain in place . . . and they do.

The administration is ‘selling’ a Fed-induced and Fed-nourished rally in the equity markets as reason for a victory lap. Who is holding them to account? Who is questioning the other ‘wizards in Washington’ as to what has been done and what will be done to prevent a similar meltdown in the future? Regrettably, the American public has allowed both Wall Street and Washington to frame both the debate and the outcome without a serious probe into the failures in policies and procedures which caused our economic crisis.

Today President Obama will make a campaign stop on Wall Street to promote his calls for financial regulatory reform. We will receive the standard platitudes. Obama will likely recruit a few high profile Wall Street executives to support his initiatives or lack thereof. The fact is, Wall Street has been working diligently to make sure that ultimately “business as usual” carries the day.

Will Obama be able to mandate that the largest banks significantly increase their capital ratios? Will Obama be able to mandate that ALL derivative transactions are reported and properly exposed? Will Obama be able to mandate that the regulatory bodies, specifically the Wall Street self-regulatory organization FINRA, are totally transparent? Will Obama be able to mandate that Wall Street compensation is fully aligned with the accompanying risks embedded within these financial behemoths? Will Obama be able to mandate that the reform of the ratings process on Wall Street have real substance?

The answers to these questions will very likely be seriously diluted by the massive Wall Street money machine which largely owns Washington. In order for the American public to receive real regulatory reform, we need legislators and regulators unshackled from the Wall Street lobby.

The American public does not need campaign stops, photo ops, and platitudes on this topic of financial regulatory reform.

I maintained on May 18th, “Future Financial Regulation: Not a Question of Sufficiency, But of Transparency and Integrity.” I wrote:

If Washington truly wants to address the regulatory failures in this area, I strongly encourage them to incorporate FINRA Is Supposed To Police the Market andNASD Knew Auction Rate Securities Weren’t Cash as compelling evidence of a massive regulatory failure which has had enormous costs, monetary and otherwise.

Will the media give the Wall Street, Washington, and regulatory triumvirate a pass as they pander about sufficiency when in fact the real regulatory question is one of transparency? In my opinion, the very future of capitalism and free markets lie in the wake.

My feelings and opinions on this topic are even stronger today.


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