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Lobbying the financial reform act

Dick Taffe — Wed, 28 Jul 2010 15:52:38 +0000

Intense lobbying is under way over the Dodd-Frank financial regulatory reform act, with federal agencies needing to fill in the details of at least 243 financial rules and conduct 67 studies before implementing the most sweeping such law since the 1930s. Political science Professor Graham Wilson, author of “Business and Politics,” says citizens should be concerned that the interest-group system is massively biased towards representing business interests.

“The regulations that give shape to laws are always crucial. In this case, the massive complexity and detail involved makes the regulations all the more important — and in this process the voices for consumer and taxpayer interests will be few in number compared with those for the financial industry.”

Contact Graham Wilson, 617-353-2540, gkwilson@bu.edu

The consumer “watchdog” fight

Dick Taffe — Tue, 20 Jul 2010 16:30:07 +0000

A battle is brewing over who President Obama should nominate as the new consumer “watchdog” under the new financial regulatory reform law after he signs it. Consumer advocates and activist groups are pressing him to tap outspoken Harvard Law Professor Elizabeth Warren, who now chairs the congressional panel overseeing the federal bailout of the nation’s banks. Others feel she may not be able to get confirmed by the Senate. BU Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and a former counsel to the Federal Reserve Board of Governors, notes that the new Bureau of Consumer Financial Protection will be a massive managerial undertaking with a $500 million budget and hundreds of employees.

“Its head should be someone who, in addition to sound policy instincts, has a proven record of managerial accomplishment. A polarizing choice will dim the chances of the bureau carrying out its mission effectively.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

Financial regulatory reform passed

Dick Taffe — Thu, 15 Jul 2010 21:01:28 +0000

With the Senate finally passing the complex financial regulatory reform law and sending it to President Obama for his signature, the work now turns to the hundreds of regulations and dozens of studies which must be completed to implement the most sweeping financial reform since the Great Depression. But while regulators work on all of that, says Political science Professor Graham Wilson, others will be watching how it all plays out politically for Obama and his embattled Democrats.

“Combined with health care and the stimulus, this gives Obama a notable legislative record. But unless he and the Democrats can do a better job of explaining to the American people what their plan is for economic recovery, this record won’t be noticed outside the Beltway.”

Contact Graham Wilson, 617-353-2540, gkwilson@bu.edu

To bank regulator stepping down

Dick Taffe — Fri, 09 Jul 2010 20:40:03 +0000

In a surprise announcement, Comptroller of the Currency John Dugan (r.) says he will step down next month as the top U.S. bank regulator. Appointed by President George Bush, Dugan was instrumental in shaping the “stress tests” for the largest financial institutions, but often sparred with FDIC Chairwoman Sheila Bair about consumer matters. Former Federal Reserve Bank examiner Mark Williams, who teaches finance at the School of Management, say choosing Dugan’s successor is an opportunity for the Obama administration to send a signal that our banks will be held to a higher accountability and scrutiny.

“It is important to not repeat the error of the past and appoint a former lobbyist, as was Dugan, who is banker friendly. As an important industry watchdog, the head of the OCC needs to set the tone that banks will be regulated — not coddled.”

Contact Mark Williams, 617-358-2789, williams@bu.edu

The weak link in bank reform

Dick Taffe — Thu, 08 Jul 2010 18:59:37 +0000

The financial regulatory reform legislation likely to be sent soon to President Obama calls for the biggest banks and hedge funds to put up some $20 billion in fees to pay the costs of additional oversight by regulators. But even that won’t help regulators don’t quickly upgrade the training and standards of rank-and-file examiners, says Mark Williams, a former Fed examiner who now teaches finance in the School of Management. In a Boston Globe op-ed, Williams — author of “Uncontrolled Risk” about the fall of Lehman Brothers — says if bank examiner performance over the last decade is an indicator, oversight may prove grossly inadequate unless the regulators become as financial sophisticated as those they’re supposed to regulate.

“Our entire financial system is dependent on strengthening regulator oversight and closing this sophistication gap.”

Contact Mark Williams 617-358-2789, williams@bu.edu

Brown gets reform bill changed

Dick Taffe — Wed, 30 Jun 2010 17:56:48 +0000

By threatening to withhold his vote for the final compromise, Massachusetts GOP U.S. Senator Scott Brown (l.) got the Democratic negotiators on the financial regulatory reform bill to delete a $19 billion fee on large financial institutions to cover costs of implementing the new law. Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and a former counsel to the Fed Board of Governors, says the Dems missed the boat by labeling the charge a “tax,” making it vulnerable to read-meat ideological attacks.

“Pure and simple, their charge should be labeled for what it is — a return of the subsidy that taxpayers bestow on the too-big-to-fail banks every day by pledging to their creditors and depositors that if the big banks go bust we collectively will pick up the tab. Senator Brown would have a difficult time refuting this framing of the discussion.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

Wall Street reform bill threatened

Dick Taffe — Tue, 29 Jun 2010 16:00:57 +0000

The death of U.S. Senator Robert Byrd (r.) is threatening to delay passage of the sweeping Wall Street regulatory reform legislation until mid-July after it had been on track for House and Senate votes this week. Law Professor Cornelius Hurley, a former counsel to the Federal Reserve Board of Governors and now director of the Morin Center for Banking and Financial Law, says the proposed legislation has been so weakened in compromise efforts to garner enough votes to pass it in the Senate that it might be worth starting over.

“Its demise would have at least two significant benefits: first, it would allow the next Congress to develop a more robust bill, particularly with respect to systemic risk; and, second, it would enable global regulators to press the ‘reset button’ on international harmonization efforts, a vision apparently abandoned by this Congress and this Administration.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

Financial regulatory bill agreed on

Dick Taffe — Fri, 25 Jun 2010 20:45:40 +0000

House and Senate conferees finally worked out a compromise bill aimed at reshaping financial regulations to avoid another Crash of ’08, with a final vote set for next week and President Obama expected to sign it by July 4th. As expected: many winners and losers. One controversial provision gives the SEC authority to require stockbrokers to protect their clients’ interest when recommending investments, potentially subjecting brokers to the same fiduciary duty as financial advisers. Law Professor Tamar Frankel, author of “Trust and Honesty: America’s Business Culture at a Crossroad” and authority on securities law, says it’s about time.

“It offers a chance and a challenge for the SEC to become the leader that it used to be from the 1940s until about 1980. It is a chance to bring about a far more reliable financial system and to refocus on productivity rather than betting.”

Contact Tamar Frankel, 617-353-3773, tfrankel@bu.edu

Deadline for financial regulatory reform

Dick Taffe — Thu, 24 Jun 2010 19:56:28 +0000

Congress is down to its self-imposed deadline to come up with a financial regulatory reform bill, leaving some of the most controversial provisions — like how to deal with the trading of derivatives — to the final hours. Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and a former counsel to the Fed Board of Governors, says that a Congress that couldn’t bring itself to enact meaningful reform legislation during the height of the financial crisis now seems to be panicking to pass what he sees as deeply flawed bill.

“Having lost the moment to make bold changes, the legislative process has become all about the November elections and very little about sound public policy. Congress may well meet today’s deadline, but we won’t be the better for it.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

Financial regulatory reform showdown

Dick Taffe — Mon, 21 Jun 2010 17:37:05 +0000

House and Senate conferees hope to wrap up this week the final version of financial regulatory reform legislation to send to President Obama, with chairmen Barney Frank and Chris Dodd delicately trying to compromises without losing votes for the overall package. What do about the trading of derivatives – the complex financial packages which helped sink the economy – remains up in the air. Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and a former counsel to the Fed Board of Governors, says the proposal currently in the Senate version but objected to by both the House negotiators and the White House, wouldn’t be the best for taxpayers fearing another bailout but would be better than nothing.

“If derivatives trading is such a socially useful and profitable activity ($23 billion in revenue among the five banks that dominate the market) why can’t it exist outside of bank holding companies? The answer to the question is that it could exist in a different, nonbank setting, but, without the backing of the taxpayers, the activity would have to shed its casino-like features.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu