Financial reform legislation
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.