Loopholes Galore in New Bank Regulations
I had hoped that Obama, being a Democrat and all, would have recognized the importance of sane regulation of the financial sector. Granted, Clinton was the one that largely dismantled regulation back in the late 90s so maybe I shouldn’t be surprised that Obama can’t see reality any more than Clinton and certainly no more than any of the Republicans, but it’s really disturbing to watch the banking industry finding quick and easy ways around Obama’s attempts.
Obama pledged that he would implement rules restricting any banking institution from owning, controlling, sponsoring or investing in private hedge funds that are not directly related to their primary job of serving customers for their own profit. On the face of it, that’s not a bad idea, it would be a step in the right direction if it wasn’t so pathetically flimsy that a 5-year old could see their way around it.
That’s exactly what’s happened though, before the rules even go into effect, major banks have announced their ways to pretend the rules even exist and keep doing what they’ve been doing. The key in this end-run is the phrase “operations unrelated to serving customers.” All the banks have to do is claim that their business is, indeed, related to serving customers and since the phrase is ill-defined in the Obama plan, nobody can tell them different. Even proprietary trading, the act of trading stocks, bonds, currencies, etc. using the bank’s own money in order to generate direct bank revenue, can be teased into compliance so long as it applies to internal hedge funds that allow outside investors access.
“This thing is about showing the public that Obama is standing up to Wall Street. So the rhetoric is heated. But the implementation will require far less change than people think right now,” says a Wall Street insider. He expects the new rules to affect less than 1% of the current bank business that it is supposed to curb.
The fact is, if there are any ways around these rules, the banks will find it. It’s up to the Obama administration to find ways that are not open to interpretation, not open to end-runs, that apply equally to everyone. In other words, he needs to put the same rules and regulations that were in place prior to Clinton’s dismantlement back in place. Clinton failed us by removing those regulations, Bush failed us by not reinstating them and now Obama is failing us by putting weak, easy to get around regulations and ignoring the need to seriously shore up the rules regarding financial institutions, the housing market and all the other areas where get-rich-quick bankers and financial shysters screwed the world economy over.
So when can we expect that, do you think?
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