Sunday, July 18, 2010

A Roosevelt Moment for America’s Megabanks? - Project Syndicate

Now, however, a new form of antitrust arrives – in the form of the Kanjorski Amendment, whose language was embedded in the Dodd-Frank bill. Once the bill becomes law, federal regulators will have the right and the responsibility to limit the scope of big banks and, as necessary, break them up when they pose a “grave risk” to financial stability.

This is not a theoretical possibility – such risks manifested themselves quite clearly in late 2008 and into early 2009. It remains uncertain, of course, whether the regulators would actually take such steps. But, as Representative Paul Kanjorski, the main force behind the provision, recently put it, “The key lesson of the last decade is that financial regulators must use their powers, rather than coddle industry interests.”

That's economist Simon Johnson on the Dodd-Frank financial reform bill.

Johnson is a fierce critic of the influence of the large banks on our political leadership. If he is encouraged by this development then perhaps there is something good here that I just can't see.

To me this sounds more like a case where politicians get legislative language they can point to and say, look what we did, but that is vague enough not to constitute reform in any meaningful way. At the same time, such language gives powerful banking interests a new opportunity to turn the political & regulatory apparatus to their advantage. They just have to make sure they don't appear to be a "grave" risk.

Instead of shopping their regulator, now all banks need is a thesaurus.

Posted via email from rhymeswithclown's posterous

No comments: