I have a new article up at Reason.com:
Last week, the House Financial Services Committee approved the final piece of a sweeping overhaul of Wall Street regulations proposed by Rep. Barney Frank (D-Mass.). The full House is schedule to begin debate on the bill today, and a vote could come as early as this weekend as representatives rush to pass the legislation before the Christmas break.
The 1,300-page bill, known as The Wall Street Reform and Consumer Protection Act of 2009, establishes a Consumer Financial Protection Agency, a systemic-risk oversight council, new capital requirements for financial institutions, and a “resolution” authority for non-banks. It also requires financial products like derivatives to be more transparent, overhauls rating agency laws, changes securitization rules, and alters the FDIC bank rescue fund. In short, it seeks to radically change the way Wall Street does business.
The intentions behind the bill are noble, particularly the desires to protect consumers, stabilize the market, keep banks accountable, and ensure fair competition. However, the proposed rules will not actually accomplish any of this. There are five main reasons why the Wall Street Reform Act will be bad for the financial industry and bad for America.
In short, the five key problems (and believe me, these are just broad categories of error) with the House bill are:
- It Formalizes “Too Big To Fail”
- It Protects Consumers To Death
- It Cripples Prospects for Economic Growth
- It Damages Employment Opportunities
- It Ignores the History of Unintended Consequences
See the whole article here for details on these. Also see my study “Rebuilding Wall Street: A Review of the White House Proposal for Reforming Financial Services Regulation” for more on the consequences and benefits of the proposed reform ideas.