Want True Financial Reform?

0
 Financial Reform and Spending

Source: Thinkstock

As the nation gears up to witness President Obama be sworn in for his second and final term, many are wondering how he plans on finishing what he started. Let’s face it, millions voted for the other guy in hopes of ensuring a second Obama term would not come to pass. Millions wanted his plans halted, including the financial laws he put into place early on.

So what’s the real solution and what should Obama focus on in the second half of his two term administration?

Those Executive Orders

Keep in mind, despite these controversial executive orders he signed into law earlier this week regarding gun control, the president doesn’t have a “do all, end all” option on most things. For instance, financial lobbyists are significant in the American political and financial sectors and of course, our other elected leaders can ensure he doesn’t do anything that’s not going to bode well for them. Ah, but he can use his influence to move the big players around in a proverbial game of Chess – if, of course, he hasn’t lost the faith of those who support him. Unfortunately, that may already be happening if you believe some folks.

We are losing public support,

said Sheila Bair, former chairman of the Federal Deposit Insurance Corporation.

The longer this drags on, the more people get cynical,

she said recently in an interview.

Dodd Frank Dynamic

First things first – the Dodd Frank financial reform rules, which were passed into law three years ago, offer impressive safeguards to ensure we don’t find ourselves with another group of too big to fail banks. In fact, these laws force banks to pay penalties for being too large. Not only that, but lawmakers are given tools that will allow them to slowly halt a failing bank. Even the most impressive math and financial minds may not understand some of the dynamics in this reform, but in short, derivatives, which are incredibly difficult to grasp, makes it more challenging for banks to move forward with risky habits.

The problem is, Dodd Frank is only one third complete. Worse, though not surprising, lawmakers have missed nearly every single deadline associated with this law. Bankers, five years after steering the nation into near catastrophic areas, still have not been held accountable – and by accountable, we mean they’ve yet to see jail time. The only leeway being made has been courtesy of the consumer Financial Protection Bureau, which has moved mountains since it was instituted.

There’s much to be done to ensure Dodd Frank serves its purpose. There must be checks and balances that will keep bank balances sheets honest while also keeping big bank CEOs from having entirely too much influence in the political goings-on in this country. Of course, Republicans present an entirely new set of roadblocks. They want to do away with Dodd Frank and all of the subsequent changes that the law brought. Again, this is just one more instance that makes the argument that politics and finances are too intertwined.

CARD Act

Then there’s CARD Act. This law is one example of what’s working. The fact that it put into place the Consumer Financial Protection Bureau is proof that consumers/taxpayers were long overdue for some kind of protective mechanism that would safeguard them from unfair banking and credit card practices. This one bureau has done more for consumers in nearly three years than what we’ve seen over the past three decades. There should be safeguards put into place that will protect it during subsequent elections that could jeopardize its existence.

The Leaders

Should we care that the president and members of Congress have been busy? Absolutely not. These politicians have a heavy load of responsibility for their role in the tough economic times. Let’s remember, too, that they and their ridiculous temper tantrums are why we were unable to resolve the fiscal cliff brouhaha before the deadline (and they had years to make this happen). This day, they’re bickering over budget deficits, healthcare and gun control – and they’re getting nowhere, frankly.

A President’s Legacy

Now, many are convinced this presidency won’t leave to history a remarkable shift when it comes to our economy. His legacy is already marred and the fact that he recently nominated controversial Jacob Lew for the role of Treasury secretary only further cements those convictions that he’s doing more harm than good. Analysts and others on Wall Street say the fact that he will become one of this country’s most revered financial regulators, along with becoming the chair for Financial Stability Oversight Council established by Dodd-Frank to watch out for risks in the financial markets, is simply dangerous. There are no guarantees that Lew will eventually run the Treasury; there should be some kind of second chair that will provide a better balance, especially when it comes to new regulations. There must also be precautions put into place that will protect Dodd Frank, and, as mentioned, the CFPB. Those precautions must include those who have the gumption to stand up to critics, specifically, bank lobbyists. Some are suggesting Morgan Stanley heavy hitter Ruth Porat, who has the expertise. Even those suggestions are controversial, though.

TARP Factor

Neil Barofsky, who was once the inspector general for the Troubled Asset Relief Program (TARP), said it best,

If you care about the fiscal crisis, the first place to start is to make sure we prevent another financial crisis. We’re having this fiscal crisis now because of the financial crisis. If we have a $4 trillion or $5 trillion hit from another crisis, negotiations over the sequester will be nothing.

Obama has his work cut out for him and there are no shortage of polls and surveys that strongly criticize him for focusing on gun control instead of financial reform. He has four years to put into place better regulations that will protect this country. Whether he goes down in history as the taxpayer or consumer hero or just another warm body who sat in the chair for eight years is entirely up to him. Either way, the time is now for him to begin chiseling that legacy.

Share.

About Author

David is a CPA and has spent the past decade as a financial adviser helping clients meet their fiscal objectives. With an appreciation for journalism, he has spent the past few years overseeing several financial columns as well as writing two previous finance blogs. He resides on the East Coast with his wife and two sons and has guided many through the recent recession while providing a no-nonsense approach to spending and saving.

Leave A Reply

Advertiser Disclosure

CREDIT DAD is an independent, advertising-supported website. Many debit cards, credit cards and other financial offers that appear here are from companies from which CREDIT DAD Websites receive compensation. This compensation may impact how and where products appear on this website (including, for example, the order in which they appear). CREDIT DAD Websites do not include all card offers in the marketplace.

Advertiser Disclosure

CREDIT DAD is an independent, advertising-supported website. Many debit cards, credit cards and other financial offers that appear here are from companies from which CREDIT DAD Websites receive compensation. This compensation may impact how and where products appear on this website (including, for example, the order in which they appear). CREDIT DAD Websites do not include all card offers in the marketplace.