I just wrote a report for the Roosevelt Institute outlining several important narratives to watch for in how the financial reform conference committee plays out in the next few weeks. It’s titled Getting the Best of Both Bills (pdf, website), and it outlines the goal financial reformers should target. There’s no reason reformers can’t fight for the best parts of the Senate bill that are currently at risk and pick and choose the good items from, while ignoring the worst parts of, the House bill, like a financial reform buffet. Here’s a summary graphic:
(Click through for full image.) There was a lot to choose from, and rather than give you dozens and dozens of examples I decided to focus on four that I thought were the closest to fantastic reform but were also in the most danger of being tossed overboard. Specifically, I frame it as how something that is in the baseline Senate bill (or something that is very close to being in there, namely the Cantwell and Merkley-Levin amendments) forms a solid foundation, and with an amendment or two brought over from the House it would be significantly better.
There is uncertainty in whether resolution authority will work in practice, and as such mechanisms that make it more credible are worth fighting for. Banks need to hold more and better capital, and there are amendments between the House and Senate that can deliver both. The over-the-counter derivatives market need to be brought into the disinfectant sunlight of clearinghouses and exchanges, and there is a clear path in the bill that gets the financial sector there. And an ongoing audit of the Federal Reserve using the mechanism from the Senate version gets us closer to an ultimate goal of transparency.
That’s not to say there aren’t more things in play. I am nervous about losing the ratings agency language, as well as having auto dealers be exempt from the consumer financial protection (which I discuss in the conclusion). But in the interest of clarity I focus on these elements that are particularly at risk.
Stay tuned here as conference committee proceeds to see how these financial reform narratives play out.
Rortybomb 