Forbes: Financial Reform, R.I.P.

[Winehole23]

Financial Reform, R.I.P. (http://www.forbes.com/2010/07/15/dodd-frank-failure-regulation-opinions-contributors-james-henry-laurence-kotlikoff-wall-street.html?boxes=opinionschannellighttop)


James S. Henry and Laurence Kotlikoff, 07.15.10, 01:20 PM EDT The Dodd-Frank bill does nothing to deal with Wall Street's central problem: systemic non-disclosure.

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So long Glass-Steagall. Hello Dodd-Frank--the most comprehensive rewrite (http://bit.ly/9r6iTR) of financial rules since 1933. This 2,319-page colossus--10 times the length of Glass-Steagall (http://bit.ly/d31Y6s)--took 1.5 years to produce and will cost $30 billion (http://bit.ly/CBOcosts) and many more years to implement. Will all this time and treasure make Wall Street safe for Main Street?



No.



Dodd-Frank is a full-employment act for regulators that addresses everything but the root causes of the financial collapse. It serves up a dog's breakfast covering proprietary trading, consumer financial protection, derivatives trading, executive pay, credit card fees, whistle-blowers, minority inclusion and Congolese minerals. Dodd-Frank also mandates 68 new studies of carbon markets, Chinese drywalls, and person-to-person lending, and many other irrelevancies.



Root Causes

None of this deals with the central problem--Wall Street's ability to hide behind claims of proprietary information to facilitate the production and sale of trillions of dollars in securities whose true values are almost impossible for outsiders to determine.



This policy of "systematic non-disclosure"--the absence of complete transparency about what financial firms really owe and are owed--left only its CEOs and their top consiglieres in a position to know what their companies really owned and owed. Consequently, the valuation of Wall Street firms came down to trusting the bank's senior executives--those who often had the greatest stakes in the non-disclosure system.



As news of all this widespread Wall Street chicanery spread, investors eventually realized that the "grownups"--rating companies, boards of directors, regulators, and politicians--had been well-paid to look the other way. So public trust took a holiday. Wall Street's house of cards collapsed, taking Main Street down in the process.



All this malfeasance was no organized conspiracy, but a self-organizing, automatically expanding gravy train. Its participants included many of the world's largest and most prestigious banks, insurance companies, hedge funds (http://topics.forbes.com/hedge%20funds), credit raters, law firms and accounting firms.



What share of financial institutions' assets and liabilities were fundamentally toxic may never be known. But that is beside the point. With no way to independently verify, in real time, the precise nature of financial firms' assets and liabilities, they are all vulnerable to panics by investors, counterparties, and depositors, based on rumors and speculation as well as fact.

(http://www.forbes.com/2010/07/15/dodd-frank-failure-regulation-opinions-contributors-james-henry-laurence-kotlikoff-wall-street.html?boxes=opinionschannellighttop)
Read more.... (http://www.forbes.com/2010/07/15/dodd-frank-failure-regulation-opinions-contributors-james-henry-laurence-kotlikoff-wall-street.html?boxes=opinionschannellighttop)

[101A]

Good Article.

Bad mess.

[RandomGuy]

I would agree with the article's assessment.

We have not solved the "too big to fail" problem.

Unfortunately, this is yet another case where the overall public good has been sacrificed on the altar of high-dollar lobbying. The "all government regulations are bad" crowd became useful idiots that were manipulated rather cynically to support a real watering down of this bill's most important aspects.

[CosmicCowboy]

I would agree with the article's assessment.

We have not solved the "too big to fail" problem.

Unfortunately, this is yet another case where the overall public good has been sacrificed on the altar of high-dollar lobbying. The "all government regulations are bad" crowd became useful idiots that were manipulated rather cynically to support a real watering down of this bill's most important aspects.

And they didn't even mention Fannie and Freddie.

[boutons_deux]

Forbes, a right-wing pro-business-no-matter-what rag, publishes this not to be anti-Wall St but to paint the reform as a yet-another MagicNegro/Dem failure.

Forbes ain't really crying about lack of regulation of Wall St.

[Winehole23]

The opacity of certain financial products led to an epochal panic in which trillions of dollars of value perished and millions of people were put out of work. This reform bakes in the opacity as well as the instability it may occasion in the future. (Who knows, maybe our financial Pooh-Bahs are more scared of the instability more transparency right now could cause.)

@boutons:

I thought that was a pretty good point, whatever else may be said about Forbes' editorial agenda. It's a mistake to dismiss the particular trees of insight for the forest of propaganda. Knowing the editorial bias in advance doesn't absolve you from reading the damn article and evaluating its actual claims.

[boutons_deux]

I didn't say the article was false. Anybody who's been watching Wall St and Repugs gut the finance bill knows it's a joke, addressing none of the real causes of the Casino Banksters Great Depression. Wall St is one big fraud, a den of thieves and hucksters selling shit, just like Forbes wants it to remain.

[Winehole23]

More transparency is clearly to the good of investors/shareholders: it provides a (relatively more) stable platform for rational expectations than the blind faith in the expertise of the (in)fiduciary institutions we formerly relied on to make the market.

[clambake]

full disclosure would scare the gamblers away.

[Winehole23]

I didn't say the article was false.You characterized the source as unreliable, even though you concede what it says may be true.


Anybody who's been watching Wall St and Repugs gut the finance bill... Not quite accurate.

The Dems willingly did the gutting for the two or three Republicans votes, plus those of the waverers in their own caucus. They did it in self-interest. Representing the bill as passed as a GOP coup rather than as mainstream "New Democrat" corporatism is highly misleading.

[Winehole23]

full disclosure would scare the gamblers away.I think I already suggested as much, but props: you said it better. :tu