I actually should have entitled this “How Not to Get Financial Reform Right,” but that didn’t sound as good! Most people agree that some reform of the financial services industry is necessary. The extent and details are of course quite controversial. But the only way that any legislation is going to be seen as legitimate is if it is bi-partisan and if it is done carefully – rushing a bill through as is currently being attempted is not in our best interest.
On one side you have the argument made by Christopher Dodd that we are 18 months into this crisis and no significant legislation has passed to prevent another crisis. Good point. On the other, however, the argument is that there is no rush or imminent threat, and that getting it right is the most important thing. The best articulation of this argument I heard was on NPR – it took three to four years following the Great Depression to get significant financial reform legislation reform passed. But those laws, passed in 1933 an 1934, are still in effect today and have proved to be very effective.
Now, I am not arguing that we should wait three or four years, but politics and elections aside, does it have to be done this week? Does the bill have to be 1,300 or so pages? And should the fact that many non-financial companies oppose some of the legislation make everyone think twice before rushing to judgment? For example, as I understand it, curbs on the derivatives markets in the current Senate bill would prevent some chocolate producers from hedging sugar prices, which would in all likelihood raise the price of your favorite candy. I know many people that would be pretty upset about this!
This is only one of many examples of unintended consequences. (I read yesterday that there are upwards of 100 examples of these types of unintended side effects from the bill.) Both sides of the political spectrum in the Senate seem to be negotiating in good faith at this time. Lets let them continue to do so until compromise is reached, or one side stops negotiating in good faith. This bill should not be rushed and it should not be politicized.
I am not being naive – I know that it is being rushed and politicized. It does, however, make me feel better to get it off my chest! Because so many people are frustrated today the attitude of something – some change – is better than nothing – or no change. I strongly disagree with this philosophy and think it creates many unintended longer-term problems.
