Fi­nan­cial re­form leg­is­la­tion

Austin American-Statesman - - OPINION -

Congress soon will pass fi­nan­cial re­form leg­is­la­tion that guar­an­tees more rounds of costly TBTF (too big to fail) bank bailouts.

Cur­rent leg­is­la­tion is flawed for ba­sic rea­sons. One, it fails to re­strict the size and growth of TBTF banks that are larger now than when their prac­tices caused the cur­rent cri­sis. Two, eco­nomic in­cen­tive for TBTF banks to take un­ac­cept­able risk is strength­ened by the cer­tainty of bailouts funded by a tax on sol­vent banks and ul­ti­mately the tax­pay­ers. Three, the pon­der­ous fed­eral over­sight struc­ture is re­tained that fo­cuses on af­ter-the-fact re­me­dial ac­tion, pro­vides anti-com­pet­i­tive ad­van­tages to TBTF banks over re­gional and lo­cal banks and pre­serves reg­u­la­tory ar­bi­trage (reg­u­la­tor shop­ping).

Pres­i­dent Barack Obama is amiss to state that this bill delivers “90 per­cent” of the fi­nan­cial re­forms needed to pro­tect con­sumers and the U.S. econ­omy from the fi­nan­cial ser­vices in­dus­try. It is, at best, a first step.

James May­field


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