Time to Finish Banking (Money) Industry Reform (And then keep a close watch).

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A sound financial industry is a critical facet to providing our Grandchildren with a better world. The crash of 2008 demonstrated once again how much bad (overly risky and/or deceitful) banking and investment practices can damage our entire economy.  Banks (at least the 50 or so largest) gave up the privilege of operating with minimal government (us) oversight when they damaged our personal finances and then needed us to bail them out.  Ignore their whining.

The July 19, 2011 Newsweek includes a piece headlined, “The Billion-Dollar Bank Heist.”  The article reports although the Dodd-Frank finance reform package was signed by the President a year ago, many of the provisions have yet to be put into effect.  There are three main impediments: 1) The law itself included delayed implementation to finalize the details of the 2,310-page bill. 2) A key provision is establishment of the Consumer Protection finance Bureau. Republican Senators have refused to confirm a head unless the agency is scaled back.  3) Most of the 300 provisions in the bill are being challenged by one opponent or another.  Per co-author Representative Barney Frank the bill is “facing a death through a thousand cuts.”

Let’s review these points in reverse order: #3-Rep. Frank’s comment is interesting in that it parallels a concern that Elizabeth Warren expressed in the May 24, 2010 issue of Time, “Do you know how many little changes could be made in that statute to just cut the legs out from underneath it?”  (Note, per Newsweek the banking industry has spent $1 million January – March 2011 lobbying against various provisions.)  #2-The Republican Senators refusal to confirm a Head for the new agency has the appearance of simply more Republican obstruction. This appearance is unfortunate because it diminishes the support for reducing another voluminous (not necessarily comprehensive) bill.  A 2,000+ page bill is bad legislation.  Congress really doesn’t know (can’t know) what it’s passing, a key problem shared with the health care bill. This makes it easy for opponents to pick apart specific language.  #1-The built-in delays are necessary for a bill of this magnitude, or at least for the most involved pieces of it.  But some parts of “thou shalt not cheat thy neighbor” shouldn’t take a year to implement.

Here’s a second lesson that struck me after reading the Newsweek article.  “…bills so momentous-or at least critical to a president’s reelection prospects-that those around the commander in chief orchestrate a more elaborate [signing] ceremony.  Such was the case with [the] Dodd-Frank [bill] signed …against a backdrop of velvet curtains …[and] 400 dignitaries…”  The previous description was the big event that we all saw on TV last July.

The Buzz: “Hooray! We, through government agencies, are going to keep a better watch and control over the money industry so we don’t have to relearn the lessons of 1929 and 2008. “  (The incumbents are happy because the voters have been appeased.)

The Reality: We will have to wage the continual fight of Wall Street versus Main Street, or more specifically, the lobbying money of unscrupulous* bankers versus the votes of you and me.  We have to keep the pressure on our Representatives and Senators and keep reminding them that Wall Street sacrificed autonomy when you and I had to bail them out.  The unscrupulous won’t rest; we cannot either.

*(I believe that bankers like other groups are mostly honest.  However John Dillinger’s words are worth remembering.  When asked why he robbed banks, he answered, “Because that’s where the money is.”  The liars and cheaters don’t wear a big LC on their blazers.)

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