I think President Obama was relieved to finally get reform to pass and was unlikely to veto this 2300 page bill. Ronald Reagan wanted a line item veto, but it never happened. I would vote for it. The laws are getting bigger by the day.

I like some of the things the Republicans are doing, especially the YouCut program. As for HR 3310, it has some nice points, like revoking authority from the Fed and OTS and winding down Freddie and Fannie. But, it did zero for consumer protections or derivatives reform. Nor, did it reinstate Glass-Steagall. Basically, the banks would still be partying out of bounds.

Not to get partisan, but here is my take. Banks bet their lobby money on Republicans to block the reform and it almost worked. Thankfully, a couple of Republicans crossed and we got reform. Now, banks will be targeting whomever wins in the next election to try and undermine these reforms.

Warren Buffet is the one who bailed out LTCM and he recently called derivatives “Weapons of Financial Mass Destruction”. I am so glad they finally reformed this mess.

BTW, one Republican reform plan HR 3310 was introduced last summer by Max Bachus (R-AL) known as the Consumer Protection and Regulatory Enhancement Act. In a nutshell it forces the government to quit picking winners and losers by stopping bailouts and let capitalism’s creative destruction process run its course.

For the record, the Republicans have competing bills to every Democrat one (be it healthcare or financial reform) – unfortunately, they tend to get killed or buried by the majority party.

@Cognoramus: Let’s be careful not to slip into hyperbole here to try and make a point. Only the most rabid Libertarians (note the capital L) argue for complete deregulation.

The majority (like myself) accept a limited role of government and also realize that measured levels of regulation is absolutely necessary.

To use robber barons and modern-day Somalia as an example for why libertarianism doesn’t work is completely off the mark.

The great majority of libertarians are not anarchists. That is unless you consider this nation’s Founding Fathers to be anarchists too.

Best,

Len
Len Penzo dot Com
Len Penzo recently posted..Black Coffee- My Favorite Blogs- Money News- and Opinions 56 The Spelling Bee Edition

There’s an interesting story about derivatives and the CFTC. You probably know that Brooksley Born warned about derivatives in 1997 before LTCM, but Rubin, Greenspan and Summers attacked her. What’s not well known is that the CTFC was stripped of all regulatory authority for 6 months due to high level pressure from the Clinton Administration! It’s hard to imagine this now.
Jennifer Barry recently posted..Lasso Your Budget

I remember writing something illustrating why libertarianism doesn’t really work and using robber barons at the turn of the 20th century and modern-day Somalia as examples, but I think this one outshines those in scope and relevance.

Great blog, BTW

These new powers could be a reach, depending on how they are implemented. I understand the TEA Party’s desire to limit the government. However, if history has proven anything, it’s that banks, utilities and other monopolies must be regulated. Every time they are deregulated, disaster soon follows, because there are no competitive pressures to keep them in check.

I love the burglar alarm analogy. I may swipe that for use in the future.

I’m bummed they put the CFPB under the Fed. Consumers really need someone looking out for them and the Fed doesn’t qualify. I wish they had of put this under the FTC or the Department of Consumer Affairs.

The Fed audit capability is weak. It allows the GAO to audit two years ago, to see where the money went, after the financial crisis. My hope is that the audit results will be so ridiculous that people will demand the Fed be opened permanently.

As for derivatives reform, the barn burned down and the horses died in the fire. They should have figured this out during the dot-com bust, when LTCM melted down. But, at least they can prevent future problems. If this wasn’t regulated, future problems were inevitable.

You can’t have it both ways; like you said, there are a lot of positives to this bill. It’s not perfect, but it’s definitely better than the financial wild west we had before.

@Jennifer, yeah, this may be too late to help the current mess but installing an alarm system after you’ve been robbed just means it may not happen again.