Another Unappreciated Victory

16 July 2010



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Congress Passes Financial Reform Bill

The US Senate passed the financial reform bill that came out of conference committee yesterday on a vote of 60-39. The Dodd-Frank Bill, after Senator Christopher Dodd and Congressman Barney Frank who ushered the bill through Congress, will become law as soon as the president signs it. Chalk up another victory for President Obama, to go with the stimulus package, the anti-nuke deal with Russia, healthcare reform, and the Sotomayor confirmation to the Supreme Court -- not that he is getting any credit for any of these.

The Wall Street reform bill establishes a Consumer Financial Protection Bureau that can write new rules governing mortgages and credit cards to prevent banks from taking advantage of uninformed borrowers. It forces most derivatives to trade on exchanges rather than privately to ensure the failure of one party does not result in the failure of several more. Most of all, and best of all, it will create a new council of regulators, largely from Treasury, who will determine how much leverage banks can have and establish procedures for winding down a failed institution.

Of course, the Republican'ts hate everything about the bill down to the typeface used in printing it. "[This bill] is widely expected to stifle growth and kill jobs," said Senate Minority Leader Mitch McConnell (R-KY). A lawyer and not an economist by training, he is in no position to grouse after his party's policies brought about the global economic implosion.

What is more amusing and depressing is the response from the left of the spectrum, or what passes for the left in America. One article on Huffingtonpost.com yesterday asked "what did we give up to get to 60 votes to break the filibuster?" The article then went on to list numerous things that are not in the bill. In truth, the progressives lost nothing in getting to 60 because the alternative was the status quo. Not getting to 60 meant not getting a bill at all.

As an example of just how uncomfortable being in power is for some liberal-progressives, the usually intelligent Eric Alterman wrote in The Nation, "Few progressives would take issue with the argument that, significant accomplishments notwithstanding, the Obama presidency has been a big disappointment." Significant accomplishments notwithstanding? What do they want? Lemonade rain and free pony rides along the foothills of the Big Rock-Candy Mountain? Significant accomplishments like the Wall Street Reform Act are what it's all about.

Naturally, the Dodd-Frank Bill has short-comings (it mandates a study of mortgage-purchase companies FannieMae and FreddieMac but no action). The biggest is that it leaves a great deal to regulators, who will no doubt be lobbied extensively. And when the Republicans return to power someday, they may appoint lousy watchdogs like they did in the Bush years.

Eventually, another economic meltdown will occur. That is the nature of markets, and indeed of human psychology. This bill will not prevent it; no bill can prevent it. What this bill does ensure is that the causes of the next meltdown won't be the same as the causes of the current one, and maybe, just maybe, the next one won't be as bad. That is the definition of progress.

© Copyright 2010 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.

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