from WSJ:
–Many of the provisions in the bill would help to reduce the risk of an identical crisis developing… Unfortunately, as the old gag goes, if you’ve seen one financial crisis you’ve seen one financial crisis… The financial overhaul bill will not prevent the future mispricing of assets nor will it prevent speculators of all types borrowing money. Nevertheless, the bill should help to ensure that in future commercial banks aren’t the ones taking the speculative risks. –Paul Ashworth, Capital Economics
–The legislation does take concrete steps to rein in excessive risk taking by Wall Street firms. It seeks to restrain major financial institutions from over leveraging and works to protect taxpayers so they are never again forced to be in a position to bail out banks from their own folly. The disturbing irony is that these days banks are shunning risks altogether. The pendulum of risk taking by lenders has swung to the side of excessive caution. By dramatically cutting back loans to consumers and small business, financial institutions have hampered the ability of the economy to fully bounce back from the most severe recession since the Great Depression. –Bernard Baumohl, Economic Outlook Group
–Whatever the merits of this bill, it in no way could have prevented the 2008-2009 collapse if its provisions were in place before the fact. It will tend to raise the cost of credit to American consumers and businesses and limit its availability to smaller firms and less credit worthy individuals. Because of the bill’s emphasis on size, it will create something of a bifurcated financial system, with heavily regulated large firms, constrained in what they can do and consequently in their profitability, and more flexible smaller firms. –Milton Ezrati, Lord, Abbett & Co.
–Although the legislation is stronger than I thought it would be, it’s important to note that many of the new rules are written in a way that will depend upon the judgment of regulators and their inclination to crack down, or not, on particular behaviors… All the laws in the world won’t help if they aren’t enforced. I am glad that the new legislation passed, and I think it is a step forward. But I believe that for the most part the rules and regulations that were needed to stop the housing bubble were on the books already. It wasn’t lack of legislation giving regulators the authority they needed that was the problem. –Mark Thoma, University of Oregon
–It is arguable how much this bill will improve financial stability. I am not a big fan of the workout scheme, and I doubt that the various derivatives proposals will in the end lead to dramatically less risk taking, since investors can go overseas and do other things to take risk. There is no question that it could have been worse. The Fed could have lost much more of its independence, and there were some on the left calling for the big banks to be broken apart. And all of the watering down that occurred near the end of the process makes the bill less onerous on several fronts than it might have been. So we can be thankful for that. –Stephen Stanley, Pierpoint Securities
–There are many justified criticisms of the roughly 1500-page bill, but we must not lose sight of how much it accomplishes. I believe that the bill, combined with regulatory changes that are in train, will move us perhaps two-thirds of the way from where we are now on financial regulation to where we should be… There are a number of provisions I do not like, or would like to see done differently, such as the Volcker Rule and Senator Lincoln’s provisions on separating out derivatives activities. However, the net effect of the bill should be to substantially increase the safety of the financial system, and therefore of the economy, at a cost that is reasonable. –Douglas Elliott, Brookings Institution
–The bill will be sold as a never again bill. The bill will make financial crises less frequent and less severe. How much less severe and how much less frequent remains to be seen. –Robert Litan, the Kauffman Foundation
–Business Roundtable member CEOs… are extremely disappointed by the conference committee’s final report, which does not address the causes of the financial crisis. The nearly 2,000-page bill was rushed to conclusion without due consideration of the consequences, intended and unintended, for U.S. global competitiveness, long-term sustainable economic growth and job creation. provisions granting the Commodities Futures Trading Commission authority to impose margin requirements on end-users will increase business risk and substantially raise costs for the more than 12,000 public companies that had nothing to do with the financial crisis — which could cost 100,000-120,000 American jobs. In addition, among the many corporate governance provisions, none of which are related to the financial crisis, the disruptive proxy access provision will stifle American companies’ ability to focus on long-term growth. Business Roundtable recognizes the need for an effective financial regulatory system, but the conference report is simply too much, too broad and, in fact, endangers our entire economy. –John J. Castellani, Business Roundtable
–Without a doubt, the centerpiece of reform is the establishment of the new, independent Consumer Financial Protection Bureau with only one job: protecting consumers who buy financial products at banks and non-bank lenders, from mortgage companies to payday lenders. While the bureau will not regulate predatory car dealer practices, a last minute compromise gives the Federal Trade Commission new authority over car dealers who initiate loans. –Ed Mierzwinski, U.S. Public Interest Research Groups
–The industry is committed to making this bill work. There is a lot to like in this legislation, but ultimately, we have some concerns about the impact to consumers, industry and economy. We are very pleased to have this certainty and closure about how we can continue to move our economy forward. The financial crisis taught all of us many lessons. We needed better, more effective regulation. We needed smarter risk management. And we needed every participant in the financial system — lenders, borrowers, regulators and legislators — to take greater responsibility. We’re moving forward, and concentrating on getting back to the business of financing America. –Steve Bartlett, Financial Services Roundtable
–We see landmark legislation when it comes to consumer protection, offering all of us an independent watchdog on our side. For the first time the $600 trillion derivatives market will be transparent and have to maintain capital to back up its bets - a move that was once inconceivable. The adoption of the Volcker Rule represents a major change of direction, stopping banks from using insured deposits to support speculative activity. We see big steps in the right directions when it comes to hedge funds and private equity, as well as improvements for investors to have a voice. –Heather Booth, Americans for Financial Reform
–Significant improvements have been made to the conference report to minimize the potential negative consequences of adding federal oversight to the state-based insurance regulatory system. However, deep concern remains over the long-term impact of this legislation on U.S. competitiveness for the financial services sector… Duplicative federal oversight threatens to add costs to the insurance marketplace without corresponding benefits to the consumer. It also creates potential conflicts with existing state regulatory protections. –David Sampson, Property Casualty Insurers Association of America
–The bill will be sold as a never again bill. The bill will make financial crises less frequent and less severe. How much less severe and how much less frequent remains to be seen. –Robert Litan, the Kauffman Foundation
–What a wasted opportunity. Much of what we had advocated for on behalf of investors and taxpayers was ignored. –Jim Allen, CFA Institute capital markets policy group
