The GOP FinReg Proposal — A Good Sign or Bad?
Last night, Republicans released their counter-proposal to Chris Dodd’s Financial Reform Bill (full text here). I don’t claim to have read either in its entirety, but the general consensus seems to be that they are not all that fundamentally different. Annie Lowrey of the Washington Independent has a good comparison of the two proposals. Here is some of what she has to say:
First, the similarities. There are many. Both bills create systemic regulators to keep watch over risky firms. Both ensure that taxpayers will never be on the hook for Wall Street bailouts again by creating some form of resolution authority – Democrats by taxing banks for a $50 billion liquidation fund, to be used in the event that a systemically important bank needs to be shut down; Republicans by requiring that the Federal Deposit Insurance Co. get back any government money spent in the process of liquidation. Both require hedge funds to answer to a regulator: in the Democrats’ case, the Securities and Exchange Commission; in the Republicans’, a new oversight committee. Both vaguely hold that credit ratings agencies will receive bolstered oversight, but in both cases, the ratings agencies’ fundamental business models do not change. Both provide weak proposals to institute some form of the Volcker Rule, banning proprietary trading at many banking institutions. Both improve Fed oversight, though without a strong requirement for an audit of the Fed’s books. Both create a powerful consumer financial protection agencywith rulemaking authority, though only in the Democrats’ version would the CFPA have the ability to oversee firms like payday lenders. Both make derivatives a regulated product, Democrats by requiring that derivatives used by financial firms to speculate go through clearinghouses; Republicans by giving a regulator authority to say if they should. Both make the president of the Federal Reserve Bank of New York a presidential appointee.
From all appearances, both sides seem to be pretty much on the same page on this one (or at least in the same book). Unlike, say, health care reform, everyone agrees on what needs to be addressed and the basic mechanisms for addressing them. The differences are only in the details, not in the fundamentals. This should be good news, right? I’m not so sure. Ezra Klein does a good job getting to the meat of it:
You can take that one of two ways. Optimistic spin: The two sides aren’t that far apart on policy, so compromise, and thus passage, will be easy. Pessimistic spin: The two sides aren’t that far apart on policy, which proves this is a political fight, which means compromise will be nearly impossible.
Considering that the two sides are within shouting distance of each other on this, and that Senate Republicans have now twice filibustered even bringing the bill to the floor for debate, I’m not getting a warm and fuzzy feeling about this. In Normal Times, when two sides agreed on the basics but differed on the details of a bill, they would get together and negotiate. Each side would give a little and they’d meet somewhere in the middle. But these are not Normal Times. These are the Times of No. Unless and until the Republican Party abandons its policy of “We don’t negotiate with the enemy”, I don’t see this going very far. The best hope is to peel off a few Republicans unwilling to appear to stand with Wall Street in an election year. We’ll see.
Tags: Financial Reform, Republicans
You mean unless the Democrat Reid abandons his confrotational stategy. Republicans want a bill and have been negotiating all along, Reid has been trying to blow it up for a political issue. If Reid would go home and campaign for a week, you would have a bipartisan bill that gets 80 or 90 votes.
Republicans are between a rock and a hard place. They can’t go into elections having voted against bank reform. But they also can’t go into elections also having broken ranks and voted for a Democratic reform bill.
They want the final bill to be a Republican bill so they can go into elections as the champions of Wall Street reform. Allowing Democrats to be the reformers would seriously break their narrative.
I just hope Harry is tough enough this time to make them choose between the rock and the hard place.
Without Harry getting tough on this thing, you’d still have McConnell whinging about starting over. The GOP bill also makes some changes to Fannie Mae and Freddie Mac that don’t seem too clear and it does not include Lincoln’s derivatives regulation piece. Which seems to me to be the bottom line for the Banks — do whatever (which is largely pretty weak) but leave derivatives completely alone.
And while Fannie and Freddie need some attention, just tacking on some bullshit from the GOP without a serious think through really needs to be a non-starter.
It will be a bipartisan bill. The Democrat Bill is written by K Street and Wall Street. The Republican Bill by the Chamber of Commerce. Mainstreet, is left out as usual. G.S. loves the Dem bill because it will force more buisness to the clearinghouse which allegedly helped create the problem. Forgive me for lacking enthusiasm.
My bill would restore a wall between the insured bank funds and traditonal brokerage house functions. We would stop tilting the field to mega bank mergers and give equal playing field to community banks in the tax and regulatory structure. We would eliminate regulations that discourage savings like the new regulation that limits you from transfering your own money to checking from savings. We would restore the margin requirements for these financial insturments to what they were pre-Bush so they can’t leverage the market into a dangerous positon. Make them risk more of their own money not everyone else’s. Restore the abiltiy of bankruptcy judges to adjust mortgages in Chapter 13 proceedings. Audit the FED. Mandate a comprehensive review of the new financial derivatives and have them catagorized like we do the old ones based upon the ability to contain losses. Give the experts in the FDIC more authority over these hybrid institutions. Enshrine into law new regulations requiring disclosure of methods and c=the interests of ratings agencies. Have a federal consumer protection office giving the public information on the ratings agencies and rating them by independence and efficiency.
I am not in Congress so my opinion matters little, but there it is.
Frannie and Freddie are at the core of the problem. There is no reform without addressing them, Cass.
“Frannie and Freddie are at the core of the problem.”
Go away, David. No disinterested party that has studied the situation has reached that conclusion. Go back to your hidey-hole, er, web site and deal with the spelling-challenged yahoos who agree with you.
No, David, Fannie and Freddie are not at the core of the problem we’re addressing now — they’re their own separate problem that deserves to be addressed separately. Also, I like how in Davidspeak “Attempting to bring a bill to the floor for debate” = “a confrontational strategy”. Not long ago “backroom deals” were the End of Our Country.
Also also, most of what you spell out sounds fairly reasonable (whew, my keyboard didn’t catch fire). This goes to prove my point that the sides are not far apart policy-wise, only politics-wise. My one disagreement with you is about the clearinghouses. They did not create the problem. The problem is that the most dangerous derivatives don’t go through clearinghouses. That’s what needs to be changed.
We all know that we need a bill, Scott. It just isn’t any bill though. We need one that begins to address the problems. I predict that the President will sign one before the August recess. The Senate will pass one, it will go to conference and be passed by the end of July. In the meantime both sides need to represent their constitutents and get the best they can out of the bill. Nothing wrong with that. We waited two years, why not wait two weeks to get it right? We are no longer that far apart. Final passage 80 to 90 in the senate and over 300 in the house.
Fannie and Freddie are NOT at the core of the problem as both Geezer and Scott note. No one serious about fixing the conditions that got us here will tell you that. I wrote about this pretty extensively, and if you were even able to read a pretty damn basic graph, you would have gotten the clue too.
Sell that bullshit over at your own blog, where people are pretty damn used to being lied to.
I respectfully disagree. I could give you sources, but I would rather go back to your own source. The GSA’s helped create a market for the later toxic assets by putting a government related stamp of approval on them. They also got away from their affordable housing mandate and got into speculation which cost taxpayers half a trillion dollars to bail them out. The fact the GSA’s got involved also got everyone else in including pension funds and rating agencies. They are at the center of the problem.
Please go away until you can demonstrate that you even understand how these GSEs work. You aren’t even prepared to defend your own indefensible position.
He’s a dumb asshole who’s just smart enough to think he’s smarter than the rest of us — just like all the other assholes who post at his blog.
You ought to have a rule banning conservatives who drop by simply to drive traffic to their own sites.
By the way, David is right — I did confuse his idiotic stance on immigration with his idiotic stance on the tea parties. It was in the tea party context that he praised Nazi sympathizers and wild-eyed Commie hunters:
—On the otherside are the establishment critics who want to diminish and destroy the movement in its infancy because it is the greatest threat to the statists on both sides of the aisle since Charles Lindberg and the America First movement or the McCarthy takedown of communists in American government and society. The establishment is trying to destroy this movement just like it did those.—
So, basically, you said you admire Ted Bundy, but I accused you of liking John Wayne Gacy. My sincere apologies.