Big Dirty Money

A blog on business law, politics, and white collar crime

March 6, 2014

The Neverending Story

Craving perspective on the state of financial reform generally and the implementation of the Volcker Rule in particular? If so, I recommend “When Regulation Threatens, Bankers Predict Doom for Main Street,” published yesterday on ProPublica by Pulitizer Prize-winning journalist Jesse Eisinger.

Masterfully simplifying the complex, Eisinger provides a view of one of the tactics successfully employed by the financial services industry to remove rules freshly issued under the Dodd-Frank Act. In this piece, Eisinger offers specifics concerning the Volcker Rule implementation. (For backgrounder on the Volcker Rule, see our previous Perpetual Crisis blog post: “Volcker Rule: A Tall Order and a Small Victory“).

Minimal expertise is needed to grasp why this is important:

“Even for those who don’t know a C.L.O. from the Electric Light Orchestra, there is nevertheless a larger point here.Reforming the banking system is a fight that will never end. Banks and their political allies fought financial reform before it was passed. To paraphrase a famous orator: They shall fight it in the courts, they shall fight it with the regulators, they shall fight it in the halls of Congress. They will search ceaselessly vulnerabilities and loopholes. They will sow doubt about the rules. . .Even when they lose, their harassing tactics will have benefits. A distracted Securities and Exchange Commission has failed to complete many important Dodd-Frank rules covering securitization. The agency still has not finalized rules banning conflicts of interests in securitizations to prevent the kind of misrepresentations that banks engaged in with the infamous Abacus and Magnetar transactions.”

 

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In the wake of the financial meltdown in 2008, there were many who claimed it had been inevitable, that “no one saw it coming,” and that subprime borrowers were to blame.