Momentum has clearly swung toward new financial sector regulation. Some are predicting that new reform will be in place as soon as May. Recent news out of Congress suggests that Republicans in Congress may be more amenable to a deal on financial reform than they seemed only a few weeks ago. Some voices on the right are suggesting that the Republicans should now begin attacking the bill as being too friendly to Wall Street. Other reports indicate that Senator Richard Shelby has proposed exchanging a stronger Consumer Financial Protection Agency for less stringent derivative regulation currently proposed. Unlike health care, debated for decades, Congresspersons are notoriously underinformed about matters of Wall Street and the financial markets. As Congress and staff become more educated about the reckless excesses engaged in by Wall Street leadership in the run-up to the financial market crisis, it is likely that the desire for thoughtful and meaningful reform will increase. President Obama remains heavily involved in shepherding the legislation through Congress.
As is expected, new and careful regulation is being resisted mightily by powerful lobbyists on Wall Street who are incredibly motivated to derail reform. J.P. Morgan Chase alone spent $6.2 million lobbying Congress against new financial reform last year. Despite taking $25 bilion in TARP bailout funds, J.P. Morgan Chase is spending millions to defeat any new regulation of its industry.
Too big to fail should be primary on Congress’s concern list. While difficult to conceptualize much upside to propping up too big to fail financial institutions, the downside of an implicit guarantee to rescue too big to fail institutions is clear and dangerous. Secretary Geithner claims that the current Senate bill solves the problem of too big to fail. Others are less certain. What is certain is that Congress must steel its spine to Wall Street lobbyists and thoughtfully consider, learn about and pass practical solutions to the difficult issues that precipitated the collapse of 2008.