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Our Financial "Regulators" Just Let Us Down Again
The Dodd-Frank Act became law 18 months ago, and it may be hard to believe, but we still aren't any better off now than we were then. Indeed, the regulators that are supposed to be protecting us from a repeat of the 2008 financial crisis can't - or refuse - to get the job done. In fact, just yesterday (Tuesday), the Commodity Futures Trading Commission (CFTC) voted to move the effective date for rules that would add oversight to the $600 trillion derivatives market to July of 2012. Derivatives were one of the primary culprits in creating the financial crisis in 2008. Originally the regulations were to go into effect on July 16 of this year, but the CFTC pushed the date back to Dec. 31. And now, regulations of the item most responsible for the 2008 meltdown won't go into effect until two years after Dodd-Frank was enacted and nearly four years after the crisis occurred. Other agencies responsible for finalizing the rules set forth in Dodd-Frank, such as the Securities and Exchange Commission (SEC) and the U.S. Federal Reserve, have been just as derelict in their duties. In short, nothing has been fixed. As Bad as Ever "The structural problems are worse," Simon Johnson, a professor at the MIT Sloan School of Management and a former chief economist at the International Monetary Fund (IMF) told the Huffington Post . "[The institutions'] size, incentives -- none of that has changed." Meanwhile, American citizens still suffering from the fallout of the last crisis are left to worry about vulnerabilities in the system and the ramifications of having a group of financial institutions that are still "too big to fail." To continue reading, please click here...
The Dodd-Frank Act became law 18 months ago, and it may be hard to believe, but we still aren't any better off now than we were then.
Indeed, the regulators that are supposed to be protecting us from a repeat of the 2008 financial crisis can't - or refuse - to get the job done.
In fact, just yesterday (Tuesday), the Commodity Futures Trading Commission (CFTC) voted to move the effective date for rules that would add oversight to the $600 trillion derivatives market to July of 2012.
Derivatives were one of the primary culprits in creating the financial crisis in 2008.
Originally the regulations were to go into effect on July 16 of this year, but the CFTC pushed the date back to Dec. 31. And now, regulations of the item most responsible for the 2008 meltdown won't go into effect until two years after Dodd-Frank was enacted and nearly four years after the crisis occurred.
Other agencies responsible for finalizing the rules set forth in Dodd-Frank, such as the Securities and Exchange Commission (SEC) and the U.S. Federal Reserve, have been just as derelict in their duties.
In short, nothing has been fixed.
As Bad as Ever "The structural problems are worse," Simon Johnson, a professor at the MIT Sloan School of Management and a former chief economist at the International Monetary Fund (IMF) told the Huffington Post. "[The institutions'] size, incentives -- none of that has changed."
Meanwhile, American citizens still suffering from the fallout of the last crisis are left to worry about vulnerabilities in the system and the ramifications of having a group of financial institutions that are still "too big to fail."
"Dodd-Frank is baby steps," said Money Morning Capital Waves Strategist Shah Gilani. "Much of it is yet to be written. Some of it may never be written."
Gilani lays part of the blame on U.S. President Barack Obama, who he said could have used the tide of public opinion to usher in far tougher financial reforms had he focused on it immediately upon taking office in 2009.
Instead, the banks were able to sell the argument that punishing them would restrict their ability to perform their role in the economy, and could even make matters worse.
Now the window for real reform has closed.
"We won't get another chance to fix the system until the next crisis," Gilani said.
Gilani likens the current feeble attempts at regulation to trying to fill an earthquake fault with sand. "They'll say, "If we see any more trouble, we'll just throw in more sand.'" That won't work. We need to get down to where the earthquake is happening."
The MF Global Example If anyone needs proof that delaying the Dodd-Frank regulations is risky, they need only look at the recent MF Global Holdings (PINK: MFGLQ) fiasco.
When asked by a Congressional committee where $1.2 billion of missing customer money went, former CEO Jon Corzine had no answer.
While that scandal unfolded, the CFTC tried belatedly to push through another delayed regulation that would have prevented trading firms from using customer money for investments in foreign sovereign debt funds.
As Gilani pointed out recently in his free Wall Street Insights and Indictments e-letter, Corzine had lobbied the chairman of the CFTC, Gary Gensler, to delay that regulation. The pair had spent 18 years working together at Goldman Sachs Group Inc. (NYSE: GS).
It's apparent that the government - from President Obama to Congress to the various federal agencies entrusted with enforcing the rules - has let the American people down once again.
"Even the regulations that have been created are completely inadequate," Gilani said. "We'll have another crisis - and the next time it will be worse."
News and Related Story Links:
Tags: 2008 financial crisis causes, 2008 financial crisis explained, cause of financial crisis 2008, causes of 2008 financial crisis, causes of financial crisis 2008, causes of the 2008 financial crisis, causes of the financial crisis 2008, Dodd-Frank, Financial Crisis, financial crisis 2008, financial crisis 2008 explained, financial crisis causes, financial crisis explained, financial crisis inquiry commission, global financial crisis, personal financial crisis, surviving a global financial crisis, what caused the financial crisis of 2008
In fact, just yesterday (Tuesday), the Commodity Futures Trading Commission (CFTC) voted to move the effective date for rules that would add oversight to the $600 trillion derivatives market to July of 2012.
Derivatives were one of the primary culprits in creating the financial crisis in 2008.
Originally the regulations were to go into effect on July 16 of this year, but the CFTC pushed the date back to Dec. 31. And now, regulations of the item most responsible for the 2008 meltdown won't go into effect until two years after Dodd-Frank was enacted and nearly four years after the crisis occurred.
Other agencies responsible for finalizing the rules set forth in Dodd-Frank, such as the Securities and Exchange Commission (SEC) and the U.S. Federal Reserve, have been just as derelict in their duties.
In short, nothing has been fixed.
As Bad as Ever "The structural problems are worse," Simon Johnson, a professor at the MIT Sloan School of Management and a former chief economist at the International Monetary Fund (IMF) told the Huffington Post. "[The institutions'] size, incentives -- none of that has changed."
Meanwhile, American citizens still suffering from the fallout of the last crisis are left to worry about vulnerabilities in the system and the ramifications of having a group of financial institutions that are still "too big to fail."
"Dodd-Frank is baby steps," said Money Morning Capital Waves Strategist Shah Gilani. "Much of it is yet to be written. Some of it may never be written."
Gilani lays part of the blame on U.S. President Barack Obama, who he said could have used the tide of public opinion to usher in far tougher financial reforms had he focused on it immediately upon taking office in 2009.
Instead, the banks were able to sell the argument that punishing them would restrict their ability to perform their role in the economy, and could even make matters worse.
Now the window for real reform has closed.
"We won't get another chance to fix the system until the next crisis," Gilani said.
Gilani likens the current feeble attempts at regulation to trying to fill an earthquake fault with sand. "They'll say, "If we see any more trouble, we'll just throw in more sand.'" That won't work. We need to get down to where the earthquake is happening."
The MF Global Example If anyone needs proof that delaying the Dodd-Frank regulations is risky, they need only look at the recent MF Global Holdings (PINK: MFGLQ) fiasco.
When asked by a Congressional committee where $1.2 billion of missing customer money went, former CEO Jon Corzine had no answer.
While that scandal unfolded, the CFTC tried belatedly to push through another delayed regulation that would have prevented trading firms from using customer money for investments in foreign sovereign debt funds.
As Gilani pointed out recently in his free Wall Street Insights and Indictments e-letter, Corzine had lobbied the chairman of the CFTC, Gary Gensler, to delay that regulation. The pair had spent 18 years working together at Goldman Sachs Group Inc. (NYSE: GS).
It's apparent that the government - from President Obama to Congress to the various federal agencies entrusted with enforcing the rules - has let the American people down once again.
"Even the regulations that have been created are completely inadequate," Gilani said. "We'll have another crisis - and the next time it will be worse."
News and Related Story Links:
- Money Morning:
Is MF Global the Tip of a Titanic Iceberg? - Money Morning:
The Inside Story of How Our Financial Regulators Let Us All Down - Money Morning:
These Three Men Represent Everything That's Wrong with Wall Street - Money Morning:
The New Abnormal: Permanently Engineered Market Volatility - Money Morning:
By Yanking the Teeth Out of Dodd-Frank Act Ratings Rules, SEC Blunts Hope for Real Financial Reforms - Reuters:
Cost-benefit lawsuits snarl Dodd-Frank implementation - New York Post:
MF may happen again - Reuters:
CFTC moves to delay some swaps rules past July 16
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