Grading the Finance Reform Bill
On Thursday, July 15, 2010, the Senate passed the Financial Reform (Dodd-Frank) bill (the usual 60-39 vote, with all but one Democrat voting in favor and most Republicans against) and it will be headed for President Obama’s signature. Accolades from most Democrats, financial disaster predictions from most Republicans.
The Wall Street Journal (“Grading the Bill,” July 16, 2010) asked 12 experts to rate the bill from A to F. Interestingly, grades ranged from A to F with a couple of incompletes and a “wait-and-see.”
Some of the key “votes:”
Henry Paulson, former Treasury Secretary, incomplete because of no solution to Fannie and Freddie and all the unknowns;
Harvey Pitt, former SEC Chairman, F, because it makes a broken regulatory system worse and fixes nothing;
Peter Wallison of the American Enterprise Institute, F, for weakening financial institutions and ignoring the causes of the crisis.
Doulgas Elliot of the Brookings Institute, A-, because it makes the system substantially safer.
Nouriel Roubini, economics professor, C+, because the bill does not address the causes of the crash.
Bill Gross of PIMCO, D+, because lobbyists diluted what must be done; Gross also suggests that making former Fed Head Paul Volcker “dictator in chief” would have been a better idea.
Simon Johnson, economics professor, B, because the government can break up the big banks when they pose a “grave risk.”
Evaluation of the bill seems to follow political ideology more than the bill’s actual content. In other words, the so-called experts are not much help. With thousands of lobbyists descending on Congress to minimize the damage (while maximizing the complexity), it is hard to believe I could give the bill anything better than a C.
