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Dean Baker: 'Reform Bill Will Improve Regulation in the Financial Sector'
Statement on Wall Street Reform Bill
Washington, D.C.- Dean Baker, co-director of the Center for Economic and Policy Research (CEPR) issued the following statement on the passage of the financial reform bill by Congress:
Dean Baker: "There is probably no economist who believes that this bill will end the risks of too-big-to-fail financial institutions." (photo by Flickr user Francisco Diez) "The final bill passed by the Senate today and already approved by the House of Representatives will improve regulation in the financial sector. However, given the severity of the economic crisis caused by past regulatory failures, the public had the right to expect much more extensive reform.
"On the positive side, the creation of a strong independent Consumer Financial Protection Bureau stands out as an important accomplishment. Such an agency would have prevented some of the worst lending practices that contributed to the housing bubble. It will be important that President Obama choose a strong and effective person, such as Elizabeth Warren, as the first head of the Bureau to establish its independence.
"The requirement that most derivatives be either exchange-traded or passed through clearinghouses is also an important improvement in regulation. However, important exceptions remain, which the industry will no doubt exploit to their limit.
"The creation of resolution authority for large non-bank financial institutions is also a positive step, although the fact that no pre-funding mechanism was put in place is a serious problem. Also, the audit of the Federal Reserve's special lending facilities, as well as the ongoing audits of its open market operations and discount window loans, is a big step towards increased Fed openness.
"On the negative side, there is little in this legislation that will fundamentally change the way that Wall Street does business. The rules on derivative trading will still allow the bulk of derivatives to be traded directly out of banks rather than separately capitalized divisions of the holding company. The Volcker rule was substantially weakened by a provision that will still allow banks to risk substantial sums in proprietary trading.
"More importantly, there is probably no economist who believes that this bill will end the risks of too-big-to-fail financial institutions. The six largest banks will still enjoy the enormous implicit subsidy that results from the expectation that the federal government will bail them out in the event of a crisis.
"Also, the fact that no regulators, most obviously Ben Bernanke at the Fed, were fired for failing to prevent the crisis leaves in place serious doubts about the structure of incentives for regulators. Cracking down on reckless behavior by politically powerful financial institutions will always be difficult for regulators. On the other hand, if regulators know that failing to crack down carries no consequences, even when it leads to disastrous outcomes, we can expect that regulators will have a strong bias toward ignoring reckless behavior.
"It is possible that Congress may eventually take stronger steps toward restructuring the financial sector, most obviously in the context of a financial speculation tax. While this was not included in the Dodd- Frank bill, in the context of severe budget pressures, a tax that can raise $150 billion a year in revenue may look more appealing than most alternatives. Such a tax would do far more to restructure the industry than this financial reform bill."
- Posted in
50 Comments so far
Show AllNot only was Ben Bernanke not fired, Obama zealously promoted his reconfirmation in January 2010 and most Senate Democrats voted to reconfirm him.
If you vote for a Senator who voted to reconfirm Bernanke, you are part of the problem and are actively impairing progress toward a solution.
This bill is the equivalent of replacing napalm bombs with a flame-thrower... the destructionist's capabilities have been diminished, but not done away with.
If this legislation does not absolutely set up financial regulations that will prevent the necessity of ANY future banking bailouts by the American taxpayers then it did not meet the objectives it should have been set out to meet.
Smoke and mirrors.
And the so-called "Shadow Banking" system worth about $16 TRILLION went relatively untouched.
It is sad to say that this watered-down bill is not a surprise. It just continues to show how our politicians are married to Wall Street and don't give a damn about Main Street.
Dean Baker shows why this is significant legislation even if it does not do all that most of us want it to do.
The Consumer Bureau alone justifies the legislation's passage. Our efforts should be focused on the implementing regulations and campaigning for Elizabeth Warren to head the new agency.
Baker's response, and those posted so far, reflect the cosmic "oy vey" whining attitudes of liberal despair that Michael Tomasky brilliantly observed in his recent Journal of Democracy essay.
The paralysis of perfection, an endemic disease among too many liberals, increases the chances for a combination right wing and Wall St. political takeover. Follow the political money--Wall St. isn't happy with th Financial Regulatory and Reform legislation. That's enough to tell me we've made an important, if incomplete, start with the legislation's passage.
David Cohen,
Washington DC
Umm, no. Paul Volker even said it was not what he wanted, tr. it was watered down. I would have been mostly happy only with reinstating Glass-Steagall (which never will happen). That would have been a good start with the legislation's passage. Right now, the bill is a paper tiger, tr. laughable.
"The paralysis of perfection, an endemic disease among too many liberals..." So true. In my home state of Minnesota, for example, we have three good candidates running in democrat primary instead of two dropping out to give one of them time to get traction against the horrible gop candidate of Tom Emmer. Not related to this story of course, but that's a basic problem on the left. Good comment.
Don't forget what one of your own once, said. "Frankly they (Wall Street) run the place." That pretty much explains why this bill is so weak.
Some of us have figured out how we have one party with two corrupt, corporate factions. Ease up on the Democrat kool aid, and you too, might figure that out.
I completely agree that the Democrats and Republicans are just two sides of the same coin, sorry to use such a worn out expression. The financial system is a complete set-up to ensure that the rich get richer and never have to worry about making bad investments. Actually, I recommend reading "The Creature From Jekyll Island" it explains it all very thoroughly. I don't understand why anyone thinks that anything the Federal Reserve does is for the good of the people. The Federal Reserve is a privately owned banking system that gets rich off of the interest it charges us to use its money. The system that uses this money from the banks to the investment firms are all completely involved in creating these crises. The Atlantic Monthly did a great article on the housing bubble crash right after it happened and explained how it happened because of the banks and firms calling in their loans, sound familiar(happened once before in our history). The Atlantic has also done other great articles on how the financial sector has not only been doing well the whole time but gained and has been gaining since then. I hate to use a media outlet that is sponsored by Monsanto, but they are a source that most people will find credible.
robbin505,
Well-articulated. Thanks for the suggested sources. If we can convince Democrat kool aid drinkers David Cohen and MNIdealist (above posters) that the Dems and Reps really are as you mention, two sides of the same old coin, then I would feel better. Wow, the Dems manufactured a lot of kool aid!
Add me to the kool aid list. Dems suck, but are a big step up from most of the current trash that makes up the Republican party. The republicans want less regulation and lower taxes on the rich. Go ahead and pretend that's gonna work out. We can take the Dems scraps or we can let the repubs slit our throats.
Obama has not only gone back on all of his campaign promises, he has completely sided with and sold out to the financial sector. Anyone remember why he got elected in the first place? 1. Signing statements 2. Reducing presence in the Middle East 3. Visibility in government. One of the first things he did was create more Presidential signing statements. He has not only increased our troop levels, but has started expanding to other countries. The deals he made to get the bailout passed were all done behind closed doors. These are just a few of the things that were promised and not honored. I am not exactly surprised to find Obama handing out the loot to the financial sector, just take a look at who his top contributors were. www.opensecrets.org
We've had signing statements for quite a while. They are here to stay. What matters is what they say and how the Administration acts. I don't remember any exact promises, but Obama did want some kind of decent outcome in Afghanistan. That's probably an overly optimistic idea. I believe the question is "do we have greater visibility in government now as compared to Bush?" Complete openness of government is never going to happen.
When are you people going to get your heads out of your butts?
"In Mid May 2009, Federal Reserve Inspector General Elizabteh A Coleman stunned a congressional hearing by verifying that her office could not account for 9 TRILLION DOLLARS worth of off-balance sheet transactions made by the Fed between September 2008 and May 2009." Excuse me Congress heard 9 TRILLION DOLLARS was unaccounted for and responded with nothing!!!!!
"On July 21,2009, Alan Grayson confronted Fed Chairman, Ben Bernanke, concerning the whereabouts of more than five hundred billion dollars that the fed had made as credit swaps with foreign banks. Bernanke's response: I don't know!" ("The Trillion Dollar Conspiracy" by Jim Marrs)
Now go back to a Donald Rumsfeld Press Conference, "The Department of Defense can not account for 2.1 TRILLION DOLLARS of expenditures" Was there an independent investigation? Not even a Congressional hearing.
One year later, "The GAO reported that the Department of Defense could not account for an additional 1 TRILLION DOLLARS of expenditures.
You have a puppet President working for the Council on Foreign Relations, Trilateral Commission, and Bilderberg Club ( On February 8,2009, Pesident Obama's National Security Adviser, General James L.Jones opened a speech to 45th Munich Conference on Security Policy in Germany by admitting, I take my daily orders from Dr. Kissinger filtered down through General Brent Scowcroft and Sandy Berger" Kissinger (Council on Foreign Relations and Bilderberger) ( My opinion:Sandy Berger should have been in jail for removing files from the National Archives immediately after 9/11 and destroying them. Why is he advising anyone?????) .(Again, "The Trillion Dollar Conspiracy" by Jim Marrs).....
You have sheep pretending they are congressmen as they take their bribes in the form of camapaign contributions and promises of future lobbying jobs or consultant jobs for themeselves or family members.
Oh, and don't forget the 2.7 TRILLION DOLLARS that Congresses have borrowed from the Social Security Fund and never returned (Isn't that called theft when you don't return the money you said you would return?
So, now the National Debt is 13.1 TRILLION DOLLARS.........Give me a break! Every American should be out in the streets demanding an end to the illegal and immoral invasions of Iraq, Afghanistan, and Pakistan and demnding the resignation of every incumbant including the President for "Obstruction of Justice"
I find it odd that people blame Baby-Boomers for a shortage of Social Security money. That has never made any sense to me. First of all the Boomers aren't the ones who opened up the Social Security Fund, LBJ is. He was planning to use the funds to help fund the war and never closed it back up. Since then it has been completely ransacked by everyone in power for their own purposes. Even if that was not the case how would the Boomers be responsible for the shortage? If they work and pay into it their whole lives then when they retire that money with interest would still be there for them. Before LBJ broke open the piggy bank it had a huge surplus of money and was in no way going to be in any danger of shortages. The only way it would make sense that the Boomers could be a drag on the SSF is if they receive money before they pay into it, which isn't the case.
As for the Fed and unaccounted for monies, they are a private bank and do not have to report to anyone. Greenspan and Bernanke have both made statements on that.
Obama went with Hilary to the Bildergerg meting in '08. All you have to do is watch who goes there and who doesn't to know who is going to be a power player.
And the money that Rumsfeld reported missing, the $2.3 trillion, well guess the date of that report. September 10, 2001. Is that a coincidence or what. And guess what, with the war and all, everyone just forgot what he said the day before that $2.3 trillion was unaccounted for.
And guess where the alleged plane hit the Pentagon? Right where the finance officers were trying to do an audit of those expenditures!!!!! That's ok, because World Trade Center #7 was brought down with explosives and guess what was in that building???? All the CIA's counter terrorism inteligence information on the CIA's relationship with al-Qaeda members and all the SEC´s investigations on Enron, Worldcom etc. No records! No Crimes!
I was glad to read that someone knows what the Bilderberg Club is about!!!! They met in Sitges, Spain this year and they have decided that Iran has to be attacked.....I am so proud of Henry Kissinger and Zbigniew Brzezinski!!!! Their three organizations: Trilateral Commission, Council on Foreign Relations, and Bilderberg Club, are responsible for: all the Wars, economic collapses, and deaths of millions since the early 60's. Their wealth and power has never been challenged!
I live in NM right now and a while back, then Gov. Bill Richardson was tapped by the Bush Campaign. He shortly there after went to a Bildergerg meeting. This was nowhere to be found in our local media. The Governor goes and meets with the most powerful people in the world and no one in the state cares. But a few weeks ago when Harrison Ford married Callista Flockhart at the Governor's mansion here in NM it was the top story on the front page. Funny what the media seems to think is important.
I was wondering where that extra 3 trillion in my bank account came from.
Thanks now I know.
That's funny, m60green - guess we all do our own thing, most of us with our blinders on, while living in La La Land. But what ain't so funny is all the financial masturbation that's gone on, and appears will continue to go on in the future, here in the U.S. of (greed and power) A.(ddiction). Think a whole, whole lot of us need to take off the blinders, quit massaging our privates, and go to hard, hard work to do what it takes to begin to......... UNDO THE (military/industrial/corporate) COUP!
"Financial Reform Bill Brings
Little Change to Wall Street"
_________________________________
Unfortunately, this must refer to the "little change" left in the pockets and purses of ordinary unprivileged citizens.
No offense to the true believers who piously adhere to the "half-full" dogma of Not Letting the Perfect Be the Enemy of the Good.
OS,
Bravo!
Chelsea
It was Korean Airlines flight 007 ( I kid you not).
Nixon was warned off the flight.
There was a USA spy plane shadowing it, the space shuttle directly above and a spy sattelite directly above them all when 007 was shot down. You can find a diagram in "Life Magazine" published shortly after.
The main purpose was to scramble the Soviet air defences and subs in hidden bases, so that the heat of their engines would reveal their locations.
Got any original thoughts of your own?
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Never Give Up.
Wonderful quotes!!!! We are reading the same books!!!!
The crisis Rahm is alluding to will be a "False Flag Attack" to justify invading Iran.....Dr. Rauni Kilde, an ex-minister from Finland has said, "NATO Member Nations are being forced to send naval warships to an area north of Norway in September, 2010. I believe that Iran is to be attacked and those ships are to prevent any Russian intervention." The American Free Press reported, "Members of the Bilderberg Club have decided to attack Iran at their meeting in Sitges, Spain, this past June." 10 American Warships, including an aircraft carrier passed through the Suez Canal on June 6,2010. The Egyptian Army of 4,000 soldiers guarded the canal as the ships went through. The ships then practiced bombing missions off the coast of Israel for two weeks then moved on to the Persian Gulf.
"The New World Order" is a done deal!!!!!! Now, let's have a real World War instead of these invasions and occupations of Iraq and Afghanistan.
Where has over 9 Trillion Dollars from the Federal Reserve gone? Where has over 3.3 Trillion Dollars from the Department of Defense Gone? Where has 2.7 Trillion Dollars from the Social Security Fund gone?..........Investigate "Project Hammer" not the game! Investigate "The Black Eagle Fund" and you will start to understand how the attacks of 9/11 could have been funded by the very same people who intend to control "The New World Order"
Once "They" discovered that they could murder a President and control every aspect of the investigation and murder any excess witnesses through: enforced suicides, car accidents, plane accidents, and mysterious deaths without anyone suspecting them, the world became ther playing field and Viet Nam was their first power for money experience. The: Rockefellers, Rothschilds, Bushes, Kissingers, Brzezinskis et al. could care less about human life......These are the same men who brought about: the Communist Revolution, the rise to power of Adolph Hitler, and the creation of al-Qaeda.....Yes, "They" were the money behind it all!
Reform bill will improve regulation in the financial sector, eh? If we believe that one, what else are they gonna try to sell us? Ice in the winter, maybe?
This is nothing than another joke. A facade, a charade to give the appearance of having done something. Why? Who knows? Cause it's not as if anybody cares what the sheeple think. However, I rather suspect that this wonderful legislation contains a great deal loopholes that will ease and expedite the process for the uber rich to complete the transfer of whatever little we've got left which, at this point, it's just blood.
Another half empty kind of person.
Again, we can build on this if we lower the gop in the legislative branch.
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Never Give Up.
"....there is little in this legislation that will fundamentally change the way wall street does business!!!!!!!!"............(excuse me all to hell for "selective attention")...this has nothing to do with the bromide that "perfection is the enemy of the good"...it has everything to do with being owned and the concomitant self delusion!....peace
You're a half empty type of person.
This is a first baby step. We're lucky we got this far with the gop getting in the way.
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Never Give Up.
¿isn't it naive to expect that the private operator of the central banks of the world, including the federal reserve bank, the european central bank, the bank of england, the bank of china...would restructure his mos important asset to suit the ideals and interests of his subject peoples?
¿isn't it illusory to expect that the world aristocracy of the lord of capital,the bosses of the political parties, would allow that his employees...known as public servants...affect the interest of the world emperor, the House of Rothschild?
liberty is not granted...it must be conquered!
if we ever aspire to a central bank that provides ressources to all producers of goods and services for a fee...it is because
a.- we now understand that money is not a commodity...
b.- we now deserve to be free
c.- we aim at depriving the lord of capital of the privilege of running the central banks and therefore of the privilege to run the states through his aristocracy, the bosses of the political parties.
We've got to take care of us first. Contrary to what corporations believe we can't control the world.
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Never Give Up.
The quickest way to reign in Wall Street and the Chairman of the Federal Reserve is to create a citizen's panel with subpoena power and about 250 feet of stout rope. Geitner, Goldfein, Madoff and others should and would be hung in front of the Washington Monument for a month as a reminder of the results you can expect from practising economic tyranny on U.S. citizens. End of story.
more rope please...
Great idea, now let's get the gop out of there so we can push your idea through, You know the gop will never agree to a Citizen's panel unless it's made up of more gop.
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Never Give Up.
It looks good and gets the bad guys off the hook. What more can we ask?
I can answer that, make sure the gop doesn't regain power and destroy even if it's not all you want. We can always build on it if we get more Progressives in the Legislative branch.... know any gop that fills that bill?
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Never Give Up.
"We can always build on"
What crap.
Both parties SUCK!
It's a start, something we can build on if the liberals would only decide to help keep the gop out of power.
Please don't cut off your nose to spite your face.
(Oh God I'm sounding like my Father, Mr. Cliché Man.)
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Never Give Up.
Just as he did with the bogus health care reform expect President Obama to claim that this so-called financial reform bill is a big breakthrough for we the people, rather than what it actually represents, another surrender to Wall Street. So much for change by way of incrementalism. The system is broken. Time for us to rise up en masse and change the world.
Indeed bogus health care reform--Obama now hires former Wellpoint Health Insurance Co. exec Liz Fowler to join his health deform team.
What will the "Don't let perfect be the enemy good" crowd say about this?
But-- but--but.... Liz has our best interests at heart say the Obamabots. You just wait and see............
Yes indeed. I can't wait to see how many Obama-bots howl and scream when they see their very first bill for the health insurance they are being forced to buy. And then watch, over the years, as the bill keeps getting bigger while their "benefits" keep shrinking. Then, you might just hear a few of those blind lemmings start to try out that term "medicare for all" which they, and their Golden Boy, completely fucking IGNORED on purpose when they had the chance to do something about it.
Just desserts.
"When fascism comes to America, it will be wrapped in the flag, carrying a cross."
Sinclair Lewis, "It Cant Happen Here", 1935
You're right - there is no breakthrough! We have the biggest concentration of wealth in our country right there in Congress, and they are the lackey's of Wall Street.
Of the 535 members of the Senate and House, 237 are millionaires - that's 44%.
Of the Justices on the Supreme Court, 5 out of the 9 are millionaires - that's 55%. What does that tell us: the system is rigged against the middle class!!! The majority of our "leaders" are milllionaires!!!
Does this sound like a group of people who are intent on raising the living standards of the middle class, let alone the poor????
The key operative phrase in this posting is: "However, important exceptions remain, which the industry will no doubt exploit to their limit." Our Congress is literally INCAPABLE of making a reform that is truly a "REFORM"!!!!
We need to STOP being the dupes of our Congress, choose our congressional leaders from the middle class, and get rid of this "millionaire's club" that is currently making laws to enhance its own position while letting the majority of Americans "eat cake!" (to quote Marie Antoinette).
An reform without the re-implementation of “GLASS-STEGALL, is pretty much toothless.
The fact that the politicians didn't insist on this, says it all.
The new "regulations" still enable money to make money! Where's the Beef?
How does it allow the masses go to work; earn a living, producing something of real value? Isn't that what makes a solid economy?
This is just Lipstick on the Pig!
Instead of putting lipstick on the pig, perhaps it is time for a barbeque!
Yes, it really will improve regulating the Financial Sector. And I have some excellent swampland in Florida that would make wonderful agricultural land. Just a few million bucks. Any takers?
What a dick.
"When fascism comes to America, it will be wrapped in the flag, carrying a cross."
Sinclair Lewis, "It Cant Happen Here", 1935