They say the only constant is change… and more change is coming! Last month, the sweeping Financial Regulation Bill was signed into law and promises to bring a wave of new changes to the financial system. But the question is: what does this change mean to you? Here’s what you need to know.
Generally speaking, the law calls for a new consumer protection agency and prohibits banks from taking risky bets. While those things are important, it’s also important to realize that this legislation… over 2,000 pages worth… amazingly does nothing to address the core reasons for the financial collapse.
Fannie Mae and Freddie Mac are completely left out of this legislation. Additionally, the credit rating agencies – which may have played the largest role in the financial collapse – also go unmentioned.
In fact, when former Fed Chairman Alan Greenspan was asked about Financial Regulation, he noted that this was the first time the Fed was not asked to write a regulation of this kind. He also said that there are “unintended consequences” in every page of this bill.
And one consequence we’ve seen already is that corporations are hoarding cash, and are somewhat stuck like a deer in the headlights due to the uncertainty that this and other pending legislation is creating. And when corporations hoard cash, they don’t typically hire workers, and job creation is crucial to our recovery.
Being busy writing legislation perhaps makes lawmakers feel they are actively engaged in working harder. The solution doesn’t rest in working harder, the solution is in working different. Pres. Reagan said it best when he said government is the problem. We have too much.
Reform connotes a change. More rules and regulations that don’t address the problem and don’t offer viable solutions is more of the same.