By now, we all know that last night the Senate passed their version of the financial reform bill that was mightily hated and fought by corporations, their swarm of lobbyists and the US Chamber of Commerce. I guess we should thank whatever God we pray to for small favors that it didn't drag on as long and as bitterly as the health care debate. In fact, a comprehensive bill may be on President Obama's desk as early as Monday next week.
And while it's certainly a good thing that Congress ultimately resisted the forces of darkness, there are three major issues I have with the bill. I never had any illusions that this "sweeping" "reform" bill would either be sweeping or benefiting from any actual reformist zeal but I just want to have three things clarified for me:
1) If the cost of regulating risks will make too "expensive" for banks to comply with the added oversight and if they pass these additional expenses onto their account holders, then how is this real regulatory reform? Isn't protecting Joe Accountholder from rapacious banks the main impetus for drafting such reform, in the first place?
2) Regulating interchange fees may or not prove to be a good idea in the long run. Yet if debit card holders like me (although I use a community bank, which isn't the concern of the bill) find fewer places where their cards will be accepted, in theory this could lead to bigger headaches than not being able to pay with the plastic. If more people are forced to withhold liquid capital from their banks and keeping more of their cash to themselves to make purchases that used to be made with debit cards, doesn't that hurt banks in the long run and wouldn't they, once again, be forced to retaliate by hiking fees and surcharges to make up for this shortfall in liquid capital?
3) If Freddie Mac and Fannie Mae are still owned lock, stock and barrel by the federal government, then why are they exempt from oversight from Uncle Sam? You'd think this would be the perfect time to keep an eye on these troublesome twins to ensure they've learned their lesson.
Even the most cynical of us have to concede that this bill could've been a lot worse. Think of the Bankruptcy bill of 2005, for instance, another product of hideously misplaced and badly-aimed zeal. Forming a consumer protection agency, something bitterly fought by the US Chamber of Commerce is, in theory, a good thing for US consumers. Hopefully, it won't be underfunded or neglected when no one's looking so banks will continue making usurious, predatory loans to unwary home buyers that can then be bundled and profitably sold as toxic assets by other predators such as Goldman Sachs.
Going back to the regulatory risks aspect of the bill: One thing I do like is the creation of a $150,000,000,000 slush fund to help bail out "distressed" banks. Why shouldn't they pay for their own bailouts instead of passing the buck, or 700 billion of them, to the taxpayer? And if they try to make up for that shortfall by jacking up fees and surcharges or lowering interest rates on interest-bearing accounts, there's always the option of amending the bill.
